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After a gap of nine months, gold ETFs witness inflows

Gold slide
Gold ETFs have been receiving high inflows in the last few months, data from Amfi suggests. According to mutual fund advisors, this is due to the recent revival of fortunes of gold and lingering concerns about the prospects of the economy and the stock market. Many investors, especially high net worth ones, are likely to continue to bet on the yellow metal for its reputation as a safe haven in times of crisis, the advisors say.

“HNIs or retail investors both invest in ETF, here in India, as well as major ETFs abroad. This is due to global geo-political uncertainties and economic slowdown in India,” says Pritam Kumar Patnaik, Business Head, Reliance Commodities.

There were outflows worth Rs 9.70 crores from the gold ETF category in April. Gold ETFs recorded net inflows in August and continued the trend in September as well. However, according to Amfi, inflows into gold ETF fund in India have risen in August 2019 after a gap of nine months. The ETFs saw net inflows of Rs 145 crore in August and Rs 44 crore in September. By September-end, the total assets managed by gold ETFs moved up to Rs 5,613 crore.

The gold prices have gone from Rs 32,770 per 10 grams on April 1 to Rs 40,190 on September 5. The prices became volatile lately and stand at Rs 39,260 on September 17. “Gold ETFs have seen good inflows after a long pause and this is primarily because the world is looking at safe havens. There are a lot of uncertainties in the global and domestic economy and this is driving gold up. However, there is no certainty of these inflows continuing for a long time,” says Arun Kumar, head of research, Fund India.

The inflows in gold ETFs saw a small dip in the last one month. Experts believe that this is because the markets saw an uptick after the measures by the finance ministry. However, global uncertainties might keep gold ETFs a viable option for some more time.

“Inflows into the gold ETF will likely persist amid slowing global economy due to weak data. US-China may have reached a verbal agreement; a written agreement between the two countries is still to be ratified. Recent developments here suggest that uncertainty will continue till an agreement between the two countries is ratified. No deal could see increase in investments and vice versa,” says Pritam Kumar Patnaik. Experts also suggest that uncertainty surrounding Brexit also nudged investors towards gold.

Mutual fund advisors say that retail investors shouldn’t foray into the ETF route if they want to invest in gold. They also advise against taking a tactical call in gold investments. “I believe that the ups and downs in gold prices are very unpredictable and hence retail investors shouldn’t try to time the market. Gold as a diversifier should not be more than 10 per cent in your portfolio. If you wish to take exposure, go via SIPs in gold funds,” says Suresh Sadagopan, Founder, Ladder7 Financial Advisors.
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