The purchase of sovereign bonds (SGBs) since April, driven by lockdown-led demand, has subsided in tandem with the reopening of physical


Sales in August (6.35 tonnes) were the highest ever in a month since the launch of SGBs in 2015.

However, sales in the last three months, 6.623 tonnes, have fallen.

An SGB is denominated in gm.

Not only that, sales of bonds in November, or the in Dhanteras and Diwali week, at 1.57 tonnes, were the lowest since April, after the nationwide lockdown was imposed at the end of March.

So, was the interest in bonds only because of physical gold not being available?

With people letting down their guard after the fall in active Covid cases in India around Diwali, there has been a bifurcation in demand for jewellery as consumption and demand for it as investment.

Chiragh Mehta, senior fund manager (alternative Investments), Quantum Mutual fund, said: “People have made a bifurcation between investment and consumption. With the festival season and marriages, there has been an upsurge in demand of physical gold and money is also being spent on consumption buying. As investors will again demand gold, they will come back to these efficient forms of gold investing.” And there are takers for this argument.

Metal Focus, London-headquartered bullion research firm, said in its report on Dhanteras gold sale in India “investment products demand on Dhanteras was subdued”.

However, it added “there was strong demand for bridal jewellery, though with lower average product weights. Robust demand in small towns was seen”.

The report was prepared after talking to jewellers across the country. It said usually on the day of Dhanteras alone, 20-25 tonnes of physical gold was sold in normal times.

This means that the earlier shift of demand for SGBs during lockdown has reversed in favour of physical markets, and demand for investment has remained with SGBs.

The monthly data on sales of gold bonds suggests that November may be the weakest in this financial year, but they are still much higher than the monthly average of the previous two years.

Shekhar Bhandari, president and business head (global transaction banking), Kotak Bank, said: “The attraction of SGBs will continue. Real retail consumers have subscribed to various tranches as part of allocation. They had also been cautious and conservative on consumption. The past four-six weeks have seen a significant money flow towards consumption and that is the best thing to happen to the economy. Equity has re-entered the investment basket of the common man. SGBs have given more than 35 per cent returns in the past year and continue to be best asset class.”

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