Gold ETFs witness first outflow of ₹396cr since March 2023
Gold exchange traded funds (ETFs) recorded a net outflow of ₹396 crore from India in April, marking the first withdrawal since March 2023. This shift is attributed to profit booking. Despite this outflow, the assets under management (AUM) of gold funds rose by 5% to ₹32,789 crore at April's end. This is up from ₹31,224 crore in the previous month, as per data from the Association of Mutual Funds in India (AMFI).
Performance amid rising prices
"In INR terms, gold has done fairly well over the last year but dwarfs in comparison to how equities have fared," stated Melvyn Santarita, Analyst at Morningstar Investment Research India. Santarita explained that investors may have chosen to book some profits in this segment, leading to net outflows despite rising prices. He also highlighted that gold prices have recently hit new highs in both US Dollar and INR terms.
Appeal as safe haven continues
Santarita anticipates the appeal of gold as a safe haven and hedge against inflation to persist, given ongoing geopolitical tensions and US inflation remaining higher than desired. In 2023, Gold ETFs saw an inflow of ₹2,920 crore, much higher than the ₹459 crore inflow recorded in 2022.
Attracting substantial investor interest
Gold's robust performance over recent years has garnered significant investor interest, as evidenced by the consistent increase in folio numbers. These rose by over one lakh to 51.84 lakh in April, from 50.61 lakh in March 2024. "Investing in gold ETFs offers unparalleled advantages including liquidity, cost-effectiveness, and security," stated Vishal Jain, CEO of Zerodha Fund House.
AUM shows steady growth over years
An analysis of the period from 2019 to 2023 reveals a consistent yearly growth in the assets under management (AUM) of Gold ETFs. The AUM rose significantly from ₹5,528 crore in December 2019 to ₹13,819 crore in December 2020, during the pandemic period. By December 2023, the AUM was valued at ₹25,959 crore, clocking a substantial increase of 27% from December 2022. It marked a rise of 88% from December 2020 and a growth of 41% from the year prior.
