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Are Indian Gold ETFs losing their sheen?

The total redemption that took place between January- March 2021 was Rs 143 crore.

June 10, 2021 / 07:12 PM IST
Conventionally seen as a crisis asset and a hedge against market risks, Indian gold ETFs saw their total funds mobilised fall by almost 56 percent, from Rs 686 crore in April to almost Rs 390 crore in May

Conventionally seen as a crisis asset and a hedge against market risks, Indian gold ETFs saw their total funds mobilised fall by almost 56 percent, from Rs 686 crore in April to almost Rs 390 crore in May


While global gold ETFs reversed their three-month fund outflow in May, as it added $ 3.4 billion, taking the total global gold ETF AUM (Asset Under Management) to almost $ 222 billion, Indian gold ETFs had a different story to tell. As per AMFI (Assets under management), the net inflows took a major hit, falling at Rs 287 crore for May 2021. 

May 2021 also saw a significant rise in the money redeemed from Indian gold ETFs, which went from Rs 5.9 crore on April 21 to almost Rs 105.09 crore this month. The total redemption that took place between January- March 2021 was Rs 143 crore.

Struggling to shine

Conventionally seen as a crisis asset and a hedge against market risks, Indian gold ETFs saw their total funds mobilised fall by almost 56 percent, from Rs 686 crore in April to almost Rs 390 crore in May. This is in keeping with the general Asian gold ETF outflow trend of almost $ 210 million, per the recent report by the World Gold Council. 

SEBI registered investment advisor Rohit Shah, though, believes in keeping a minimum exposure of around 5-10% in every portfolio. “Gold is a very good hedge and in the absence of an effective real estate investment, albeit as a financial asset, it is even more important to consider the yellow metal for your portfolio. However, it is important to note that such a small exposure to gold provides a level of psychological relief to investors in choppy market situations like we had last year”, he said. 

Close

2021 also marks the third year where individual participation in gold ETFs continues to decline, from 34% in 2019 to merely 13% at present. As of 31st March 2021, out of a total AUM of Rs 14,122 crore held by gold ETFs, only Rs 1,895 crore belonged to individual investors. However, what is interesting to note is a consistent rise in the net AUM of Indian gold ETFs. Standing at Rs 14,122 crore for the months of January-March, it steadily rose to Rs 15,100 crore before presently touching almost Rs 16,000 crore. 

Gold prices, recently recovering from a two-month low, closed at Rs 48,750 per 10 grams on June 10, falling for a consecutive second day, as investors practice caution and keep an eye for US data and decisions by the European Central bank, which could deeply impact bullion prices.
Ira Puranik
first published: Jun 10, 2021 07:12 pm

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