Gold Sovereign Bonds: Gold sovereign bond redemptions are expected to increase in FY24

The program was introduced in November 2015 as part of government efforts to reduce demand for physical gold. Gold bonds have a term of eight years, with an exit option for investors from the fifth year.

Gross government gold bond issuance is expected to be lower at ₹11,200 billion in FY24 from an estimated ₹12,000 billion this year and ₹12,991 billion in FY22, a Treasury official told ET.

After peaking at ₹16,049 crore in the FY21 pandemic year, gold bond issuance has since moderated gold bond issuance as investors turn their attention to more attractive investment products as economic growth recovers.

That shift could be more noticeable in FY24, as a 250 basis point rise in the repo rate since May 2022 has made a whole range of instruments, including select fixed-term deposits, more attractive.

Gold prices (24k, 999 purity) are up over 7% in the last two months alone to settle at £57,038 per 10 grams. While early investors in the program will reap the benefits of investing when gold prices were very cheap, the current level of elevated prices will deter new investors, industry experts say.

The Government expects net revenue under the scheme to fall to £9,7tn in FY24 compared with an estimated £11,7tn this FY on larger repayments, the previously quoted official said.

Analysts said a combination of factors will contribute to lower gold bond issuance next fiscal year.