Investor interest in Gold ETFs surges as uncertainty looms; inflows of ₹124 crore in April

Investors flocked to gold exchange traded funds (ETFs), which are considered a safe haven during uncertain times, and put in ₹124 crore in April after withdrawing money in the preceding month. This was in comparison to a net outflow of ₹266 crore from the asset class in March, data from the Association of Mutual Funds in India (AMFI) showed.

“Over the past few months, we have witnessed gold prices rising. While gold prices rose, some investors would have chosen to book profits or take on risk on approach with a view that central banks would pause further rate hikes,” Himanshu Srivastava, Associate. Director-Manager Research at Morningstar India, said.

He, further, said that pertinent risks still engulf developed economies, and therefore over the course of the month, investors were attracted towards Gold ETFs.

According to the data, 14-gold linked ETFs have seen an inflow of ₹124.54 crore last month, which helped in raising the assets under the management of such funds to ₹22,950 crore at the end of April from ₹22,737 crore in March-end. .

Gold, with its superlative performance over the last few years, has attracted significant investor interest, and the consistent surge in its folio numbers.

The folio numbers in gold ETFs surged by over 12,600 to 47.13 lakh in the month under review from 46.99 lakh in March. This shows that investors have become more inclined towards gold-related funds.

In the entire financial year 2022–23, inflows into Gold ETFs were at ₹653 crore, a decline of 74 per cent year-on-year from ₹2,541 crore infusion seen in the segment in 2021–22. This drop was mainly due to profit booking in this asset class and investors’ preference for equities. However, the asset base of Gold ETFs and investors’ account or folio numbers increased in the last fiscal.

Gold ETFs, which track the domestic physical gold price, are passive investment instruments that are based on gold prices and invest in gold bullion.

In short, gold ETFs are units representing physical gold, which may be in paper or dematerialised form. One gold ETF unit is equal to 1 gram of gold and is backed by physical gold of high purity. They combine the flexibility of stock investments with the simplicity of gold investments.

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