Funds in gold ETFs double in pandemic

At the end of March 2020, the total assets under management (AUM) of all the gold ETFs stood at `7,949 crore. The investment in gold exchange traded funds has surged to `16,225 crore at the end of June 2021, a rise of 104 per cent.

Affirming the faith of investors in the yellow metal during times of crisis, assets managed by Indian gold-backed exchange-traded funds more than doubled since the outbreak of the pandemic in March 2020. The number of folios has grown multi-fold during the period.

At the end of March 2020, the total AUM of all the gold ETFs stood at `7,949 crore. This has surged to `16,225 crore at the end of June 2021, a growth of 104 per cent. While in March 2020, the ETFs had witnessed a net outflow of `194 crore, in June 2021 they saw a net inflow of `359 crore. In the entire June quarter of 2021, the net inflow stood at `1,326 crore.

The number of folios too has grown multi-fold during the pandemic — from 5.26 lakh in March 2020 to 18.32 lakh in June 2021. The number of folios has been steadily rising since March 2020.

Till December quarter of 2020, ETFs were adding over one lakh folios every quarter. However, in the March quarter of 2021, they added more than 4 lakh folios and over 5 lakh folios in the June quarter of 2021.

Though gold prices dropped more than six per cent in dollar terms during the first half of ● the calendar year, the investor interest has remained firm. This has reflected in the addition of around 10 lakh folios in the first half of the year. Even flows into global gold ETFs remained stable despite price declines in the latter half of June.

The World Gold Council is optimistic about the upside potential of gold investment this year. Referring to gold ETFs, it said: “Looking forward, the current macroeconomic environment, as well as anecdotal evidence, indicates remaining upside potential for gold investment this year”.

Expectations of central banks maintaining accommodative monetary policy for some time keeps opportunity costs of holding gold low. Current levels of money supply and savings rates in certain developed markets that suggest a higher inflation rate may not just be temporary, reinforcing the need for assets like gold, WGC said.