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Gold ETFs: Developed economies witness outflows, but India and China buck the trend

In India, the heightened stock market volatility and a correction in the domestic gold price drove holdings in gold ETFs

November 18, 2021 / 10:49 AM IST
Gold ETFs, the popular vehicles for investing in the yellow metal, have registered net outflows globally in 2021. The monthly report on ‘Global gold-backed ETF flows’ published by the World Gold Council states that Gold ETFs have experienced outflows in six of the first 10 months of the year as ETF investors have generally followed gold price trends. Year-to-date, gold ETFs have seen global outflows of 181 tonnes (US$9.7bn) as large North American and some European funds have lost assets in line with oscillating gold prices.
DM 2
Gold found favour during 2019 and 2020 when COVID broke out. Things changed since the start of 2021 as gold has been under pressure on account of the dollar and US bond yields that strengthened on expectations of a quick US economic recovery on the back of a successful COVID vaccination drive across world. North America (US and Canada) and Europe witnessed mostly net outflows throughout this year due to central government announcements and heightened expectations of interest rate hikes, the report says.
EM 3
Unlike developed markets, China and India registered mostly net inflows throughout the year. According to the report, China’s ETF holdings were on rise due to weaker economic data and middling local equity market performance in the recent months. In India, heightened stock market volatility and a correction in the domestic gold price drove holdings in Indian gold ETFs. In October, the flows were negative as investors shifted their focus from gold ETFs to physical bar and coin investment with the arrival of the festivals.
People around the world always fancy about the gold and prefer holding the yellow metal in the form of jewels, bars and coins. However, the acceptance of Gold ETFs as an investment vehicle has been evident over the last decade as the number of schemes that linked to the yellow metal and their assets under management (AUM) grew significantly. According to the WGC report, there were 152 gold backed ETFs around the world that held 3,567 tonnes (or US$203bn worth) of gold as on October 29, 2021.
Glo ETFs
SPDR Gold Shares tops the chart. Domiciled in US, it is managed and marketed by State Street Global Advisors, has been one of the largest exchange-traded funds in the world. iShares Gold Trust, Xetra-Gold and Invesco Physical Gold ETC have too managed with the highest AUM.
Phy domestic ETFs
Currently, there are 11 gold ETFs available in India that are mostly dominated by corporates and high net-worth individuals. Inflows into gold ETFs have been inconsistent as most of these large investors use gold ETFs as short-term instruments. Thanks to the fund of funds and SIP facilities, retail participation in gold ETFs is on rise, though they contribute only 14 percent (as of Sep 2021) of the overall gold ETFs AUM.
Domes list
Nippon India ETF Gold BeES scores on higher volume and corpus managed. SBI Gold ETF, HDFC Gold ETF and ICICI Prudential Gold ETF are the others with higher traded volumes on the NSE.
Dhuraivel Gunasekaran

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