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Softer gold prices offer good entry levels via SGBs

With the union budget imposing tax on the gains from gold mutual funds and ETFs in line with income slabs, financial planners believe SGBs are the most efficient way to allocate money to gold for the long-term investors.

This second tranche of SGB will open for subscription during September 11-15. Investors will have to pay ₹5,873 per gram of gold after a discount of ₹50 per gram for digital payments. This is ₹3 per gram lower than the ₹5,876 a gram that investors paid in the previous tranche in June 2023.

Domestic prices have fallen about 4% since May when they touched a high of ₹61,500 for 10 grams. Over the last one year, gold prices have risen 16.56% in rupee terms, while in dollar terms they are up 12%. Gold has rallied due to buying by central banks in the last couple of years to build up their gold reserves. With talks of an interest rate cut in the US fading, analysts expect gold prices to be range bound in the near term as investors wait for further cues from the US Federal Reserve.

Wealth managers say investors should not ignore the importance of gold in portfolios, given the uncertainty around interest rate and an expected slowdown in global growth, and build a 10% allocation to gold.

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