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Gold ETFs catch investors’ eye in September, attract inflows for second consecutive month

Thu Oct 10 2019


Gold exchange-traded funds (ETF) garnered Rs 44 crore in September, making it the second straight month of inflows, as trade conflicts, signs of a global slowdown and decline in equities made investors bet big on the safe-heaven asset.


This comes on the back of a net infusion of Rs 145 crore in gold-linked ETFs in August. It was the first inflow since November last year, when Rs 10 crore was infused in such instruments.


Prior to this, gold ETFs had seen a net inflow of Rs 20 crore in October 2016 and before that, an inflow of Rs 5 crore was witnessed in such funds in May 2013.


According to the latest data available with the Association of Mutual Funds in India (AMFI), Rs 44 crore was pumped in gold-linked ETFs last month as compared to an outflow of Rs 34 crore in September 2018.

Gold prices rally


“Sudden rally in gold prices mainly due to uneasy trade negotiation between the US and China, and lower than expected global GDP growth are the key reasons for the inflows in gold ETFs in recent times,” said Omkeshwar Singh, head of mutual fund distribution business at Samco.


Himanshu Srivastava, senior analyst manager research, Morningstar Investment Adviser India said, “Like in the month of August, gold ETFs continued to witness net inflow in the month of September as well, although the quantum of net inflow was lower than the previous month. The slowdown in flows could be attributed to profit booking given the surge in gold prices in the recent times.”


The fears of a slowdown in global market has helped gold find its safe-haven appeal back which has triggered a sharp rally in its prices this year, thus, catching investor’s fancy, he said.


“Gold also adds a different layer of diversification in an investor’s portfolio, which has come in full play this year with gold witnessing one of its best years after 2011,” Srivastava added.


Assets under management (AUM) of gold funds stood at Rs 5,613 crore in September-end as compared to Rs 5,799 crore at the end of August.


Over the last few years, retail investors have been putting in more money into equities as compared to gold ETFs, mainly on account of strong returns.


Gold ETFs have witnessed an inflow in just five months in last six years. Investors pulled out Rs 571 crore from gold ETFs in 2018, making it the sixth consecutive year of outflow from such products. In comparison, they pulled out Rs 730 crore in 2017.


Gold ETFs had seen an outflow of Rs 942 crore, Rs 891 crore, Rs 1,651 crore and Rs 1,815 crore in 2016, 2015, 2014 and 2013, respectively. In 2012, they saw an inflow of Rs 1,826 crore.


Gold ETFs are passive investment instruments that are based on price movements and investments in the metal.