SGB AnalyzerSGB AnalyzerWhen an SGB trades above its fair value in the secondary market
When an SGB trades above its fair value in the secondary market
In SGB context, "premium" refers to the percentage difference when a Sovereign Gold Bond's market price is above its fair value.
Premium = (Market Price - Fair Value) / Fair Value × 100
A premium means you're paying more than the theoretical value of the gold - essentially overpaying.
Why SGBs might trade at premium: - High demand for specific series - Low supply in secondary market - Short maturity (closer to redemption) - Market expectations of gold price rise
Buying at premium is generally not advisable as you're paying more than gold's worth. However, some investors pay premium for: - Very short maturity SGBs - Specific strategic reasons
India's central bank that issues Sovereign Gold Bonds on behalf of the government
Tax on profits from selling assets held for specified long-term period
The theoretical value of an SGB based on current gold price and time to maturity
When an SGB trades below its fair value in the secondary market