Gold ETFs attract Rs 446-cr in September; the influx could continue in the coming months


Gold exchange traded funds (ETFs) attracted Rs 446 crore in September and flows may continue in the coming months due to strong demand linked to the festival season in the country.

The amount was significantly higher than the net inflow of Rs 24 crore recorded the previous month. In July, the category recorded a net withdrawal of Rs 61.5 crore, according to data from the Association of Mutual Funds of India (Amfi).

With this, the gold ETF category has so far received a net inflow of Rs 3,515 crore. The segment only experienced one month of net exits, in July.

The latest influx helped increase the number of folios in the category by more than 14% to 24.6 lakh in September, from 21.46 lakh in the previous month. So far this year, folio numbers have increased by 56%.

Market experts attributed the September influx to the correction in the price of the yellow metal and the start of the festival season in the country.

“Gold ETFs have seen a big influx over the past month. In the heart of a volatile market, the use of a safe instrument can be one of the reasons for this movement, the rise in gold prices being the other reason drawing attention to the instrument ”Priti Rathi Gupta , founder of LXME, said.

Arshad Fahoum, chief product officer, Market Pulse, said the ongoing rally in global stocks, coupled with the sharp rise in Indian stocks in 2021, may make investors wary of a further rise, which appears to have supported signs of a trough in gold prices. outside.

“If we look at the period from July to mid-September, Indian stocks rebounded strongly; which could have meant that investors switched to equity and debt funds, which in turn could be a reason why gold ETFs saw net outflows in July, slightly positive inflows in August and the huge influxes in September, ”he said.

Another interesting aspect concerns the exits of gold ETFs suffered by the United States, United Kingdom and Canada in September 2021, while Indian gold ETFs saw a large inflow during the month. under review. It could also indicate that the start of the festival season in India may have contributed to the surge in gold ETF flows in September 2021, he added.

Himanshu Srivastava, associate director, research director, Morningstar India, said gold prices have been on a downward trajectory since June of this year. Gold is considered a safe haven in times of economic downturn and when the stock markets are going through a turbulent phase.

“However, the stock market rally and economic recovery expectations have not bode well for gold lately. Additionally, a stronger dollar and higher US Treasury yields have had a negative impact. on gold prices, ”he said.

According to him, the correction in the price of the yellow metal in recent months has provided a good buying opportunity for investors, which has resulted in significant inflows in the Gold ETF category.

Investments in ETFs that track the yellow metal have been rising steadily since August 2019.

However, the asset class saw net outflows of Rs 141 crore in November 2020, Rs 195 crore in February 2020 and Rs 61.5 crore in July 2021.

Srivastava said gold works as a strategic asset in an investor’s portfolio, given its ability to act as an effective diversifier and mitigate losses during difficult market conditions and economic downturns. “This is where it draws its appeal as a safe haven.”

“During the difficult investment environment in the recent past, gold has emerged as one of the best performing asset classes, proving its effectiveness in the portfolio of investors,” he said. .

This aspect has not gone unnoticed by investors, as evidenced by the rather constant net inflow into the gold ETF category, he added.

Despite the influx, assets under management (AUM) of gold ETFs fell to Rs 16,337 crore at the end of September, against Rs 16,350 crore at the end of August. It stood at Rs 16,750 crore at the end of July.

Going forward, Market Pulse’s Fahoum said gold ETF inflows will remain positive over the next few months, mainly due to the gold price momentum since early October 2021 and strong demand. following the festival season in India.

Second, as overheated stock markets and growing inflationary pressure call for diversification, more investors may choose to invest in gold ETFs, he added.

“With the festivities approaching, we can expect that the upcoming demand for gold investments in a portfolio will lead to a higher influx for the months to come,” said Gupta of LXME.

Gold ETFs are basically exchange traded funds that invest in gold. They are listed on the stock exchange and invest directly in gold.

(Only the title and image of this report may have been reworked by Business Standard staff; the rest of the content is automatically generated from a syndicated feed.)

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