Investors continue to exit from gold ETFs in April
Investors remained bearish on gold exchange-traded funds (ETFs) as they pulled out ~540 million from the instrument in April, preferring equities over them.
The net outflow meant assets under management (AUM) of gold funds slipped to ~48.02 billion from ~48.06 billion in the preceding month, according to latest data available with Association of Mutual Funds in India (Amfi).
Trading in gold ETF segment has been lukewarm during the last five years. It witnessed an outflow of ~8.35 billion, ~7.75 billion, ~9.03 billion, ~14.75 billion and ~22.93 billion in 2017-18, 2016-17, 2015-16, 2014-15 and 2013-14, respectively.
However, the segment had witnessed an infusion of ~14.14 billion in 2012-13.
“Gold prices which witnessed a spectacular rise since 2005 and made new highs in 2011-12 fell sharply in 2012 and have been trading in a range of $1,1001,400/ounce since then. Given this range bound movement coupled with buoyant equity market performance has resulted in Indian investors largely staying away from investing in Gold ETFs, in fact we have seen redemptions year on year since the last 5-6 years.
“In any case Indian investors have traditionally preferred to hold Gold in physical form, rather than ETFs which are actually a better form of holding from an investor's perspective. Ideally investors should look to allocate 5-10 per cent of the portfolio towards Gold, which works as a portfolio hedge and helps reduce overall portfolio volatility,” Morningstar Manager Research Director Kaustubh Belapurkar said.
Gold ETFs are passive investment instruments that are based on price movements and investments in the metal.
According to the data, a net sum of ~540 million was pulled out in 14 gold-linked ETFs last month as compared to ~620 million in March.
In comparison, the investment instrument had witnessed a net outflow of ~660 million in April last year.
On the other hand, equity and equity-linked savings scheme (ELSS) saw an infusion of over ~124 billion last month.