Investors turn positive on gold ETFS

After witnessing net outflows in July, gold exchange-traded funds (ETFS) attracted ~24 crore in August on a positive global outlook, reflecting an improving sentiment towards the yellow metal.

Total inflows reached ~3,070 crore in the asset class during the first eight months of the current year (January-august), the data with the Association of Mutual Funds in India (Amfi) showed.

Inflows helped push the number of folios in the category to 2.14 million in August from 1.91 million in the preceding month. Investments into ETFS that track the yellow metal have been witnessing a steady uptick since August 2019. However, the asset class witnessed net outflows of ~141 crore in November 2020, ~195 crore in February 2020 and ~61.5 crore in July 2021.

After witnessing withdrawal in July, inflow remained positive last month, but at fairly low levels of ~23.92 crore, the data showed. In comparison, the funds saw inflows of ~360 crore in June and ~288 crore in May. “The overall positive global outlook despite the concerns around the pandemic led to an improving sentiment towards the yellow metal,” said Kavitha Krishnan, senior analyst-manager research, Morningstar India.

Priti Rathi Gupta, founder, LXME, said gold ETFS saw a significant conversion from outflows to inflows in August. As gold prices return to normal, people are again getting attracted to gold investments. “Gold ETF serves as a great tool due to its high liquidity and lower investment requirement. Gold is considered as a hedge against inflation. Hence, the third wave seems to make investors adopt the traditional investment method in due anticipation,” she said.

In addition, Gupta said equity markets are bullish and investors are sceptical about interest rate risk in the debt segment and they are seeking portfolio rebalancing, hence diverting money in the gold asset class.