This inflow helped increase the assets under management of such funds to ₹23,128 crore at the end of May (Picture used for representational purposes only). photo credit: Reuters
Gold exchange-traded funds (ETFs), considered a safe haven during uncertain times, continued to shine as they received net inflows of ₹103 crore in May. This development comes after a net inflow of ₹124 crore into the asset class in April. Earlier, investors had pulled out Rs 266 crore from gold ETFs in March, data from the Association of Mutual Funds in India (AMFI) showed.
The slightly lower inflows in May as compared to the previous month can be attributed to profit booking.
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Gold prices came down from their highs in the second half of May on positive news regarding the US government’s debt ceiling extension, providing some buying opportunities, especially after a sharp rally since March this year, Melvin Santarita , said analyst-manager research at Morningstar India.
“Gold prices are still trading higher, so some investors may have opted for profit-booking or risk taking on the outlook, should the central bank hold off on further rate hikes,” said Mr Satarita.
“The view appears to be materialising. That said, contextual risks still surround developed economies, and hence, during the month, investors flocked to gold ETFs, which are considered a safe haven during uncertain times, said Mr. Santarita.
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As per the data, gold-linked ETFs saw inflows of Rs 103 crore last month, which helped boost the assets under management of such funds to Rs 23,128 crore at the end of May from Rs 22,950 crore at the end of April.
Gold has attracted significant investor interest with its stupendous performance over the past few years, and the steady jump in its folio numbers is testimony to the same. Folios in gold ETFs increased by over 15,000 to 47.28 lakh in the month under review, from 47.13 lakh in April. This shows that the inclination of investors has become more towards gold related funds.
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In FY 2022-23, inflows into gold ETFs stood at ₹653 crore, a 74% year-on-year decline from the ₹2,541-crore investment seen in 2021-22. The fall was mainly due to profit booking in this asset class and investor preference for equities. However, the asset base of gold ETFs and the number of investor accounts or folios have grown in the last financial year.
Gold ETFs, which track the price of domestic physical gold, are passive investment instruments that are based on gold prices and invest in gold bullion.
In short, Gold ETFs are units representing physical gold, which can be in paper or dematerialized form. One gold ETF unit is equivalent to 1 gram of gold and is backed by physical gold of very high purity.