Investing in sovereign gold bond scheme at high prices could be risky

Entering this long-term instrument could cause distress if the rally ends in some years

The Sovereign Gold Bond Scheme (SGB) 2020-21-Series V is open for subscription from August 3-7. The price of this tranche has been fixed at Rs 5,334 per 1 gram of gold. Investors need to carefully decide whether they should lock in their money in SGBs for the long term at the current high prices or consider more liquid alternatives, like gold exchange-traded funds (ETFs).

The primary factor responsible for the ongoing bull run in the yellow metal is the global economic downturn. Says Feroze Azeez, deputy chief executive officer, Anand Rathi Private Wealth: “Gold prices have seen unprecedented highs due