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Gold ETFs – Do You Know Why Investors Are Attracted To These Instruments? June sees strong traction, FUTURE promises to be bright, report says


Gold exchange-traded funds (ETFs) attracted Rs. 1,328 crore from investors in the quarter ended June 2021 and experts believe the inflows will continue into the next few months of the fiscal year, Reuters reported .

By comparison, entries into the category were much higher at Rs 2,040 crore in the same quarter last year, according to data available from the Association of Mutual Funds of India (Amfi).

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Quantum Mutual Fund Sr, Alternative Investment fund manager Chirag Mehta said gold ETF inflows were significant in the June quarter of last year due to significant economic uncertainty due to the COVID-19 pandemic. This year, given the optimism surrounding the economic recovery, admissions have slowed a bit.

“The higher net inflows into gold ETFs last year could be attributed to the onset of the pandemic that created massive uncertainties over asset prices and inflation, leading many investors to look to them. Gold ETFs, ”said Arshad Fahoum, chief product officer at Market Pulse, said.

Expressing similar views, Divam Sharma, co-founder of Green Portfolio, said the first half of 2020-21 saw high inflows in gold ETFs as there was uncertainty with Covid 1.0 and investors wanted to diversify the liquidity to this asset class.

“With the resumption of trading activity and the stock markets continuing to outperform, allocations have shifted from gold. Bitcoin has also been a spoiler for sustaining prices and, therefore, allocations to the class of. assets have been under pressure, ”he added.

In the first three months of 2021 gold ETFs recorded net inflows amounting to Rs 1,779 crore and over the following three months these instruments recorded a net infusion of Rs 1,328 crore, according to Amfi data.

Despite the slowdown in inflows, gold ETF assets under management (AUM) rose sharply to reach Rs 16,225 crore at the end of June 2021, compared to Rs 10,857 crore at the end of June 2020.

At the same time, investor accounts or folios in gold ETFs jumped three times to reach 18.32 lakh during the period under review, up from 6.31 lakh in June 2020.

Investors regularly recognize the need to add gold as a diversification in their portfolio and this is evident from the fact that the category received a net inflow of Rs 9,737 crore from January 2020 to June 2021.

Gold functions as a strategic asset in an investor’s portfolio, given its ability to act as an effective diversification tool and mitigate losses during difficult market conditions and economic downturns, said Himanshu Srivastava, Director research associate, Morningstar India.

Going forward, Market Pulse’s Fahoum expects the current fiscal year to attract more gold ETF inflows, especially if gold prices continue to show strength at short term.

Additionally, with major global indices at all-time highs, any concerns about the pandemic or falling bond yields coupled with higher inflation could induce caution among the investor population, which could bolster gold prices. and the possible influx of gold. ETF, he added.

Mehta of Quantum Mutual Fund also expects gold ETF inflows to continue as investors realized the importance of gold in their portfolios and still being under-allocated from a market perspective. wallet.
“Gold ETFs will continue to remain a vehicle of choice due to their price efficiency and liquidity. Gold is seen as a useful asset in emergencies and last year’s lockdowns. have dried up much of the retail liquidity at that time, ”he added.

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


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