Gold exchange-traded funds(ETS) involved Rs 1,328 crore from investors within the quarter ended June 2021 and specialists believe that inflows will continue within the coming months of the fiscal. As compared, inflow within the group was much higher at Rs 2,040 crore within the similar quarter last year, consistent with data available & Association of Mutual Funds in India (Amfi).
Quantum open-end fund Sr Fund Manager, Alternative Investment, inflows in gold ETFs were significant within the June quarter last year on account of serious economic uncertainty thanks to the COVID-19 pandemic. The higher net inflows in gold ETFs last year might be attributed to the onset of the pandemic which formed massive uncertainties about asset prices and inflation, driving many investors to show to gold ETFs.
Divam Sharma, Co-founder at Green Portfolio, said the primary half 2020-21 saw high inflows into gold ETFs as there was uncertainty with Covid 1.0 and investors wanted to diversify cash to the present asset class. During the main three months of 2021, gold ETFs saw net inflows to the tune of Rs 1,779 crore and within the subsequent three months, such instruments witnessed a net infusion of Rs 1,328 crore, Amfi data showed. The Assets Under Management (AUM) of gold exchange-traded funds rose sharply to Rs 16,225 crore at the top of June 2021 from Rs 10,857 crore in June-end 2020.
At an equivalent time, investors’ accounts or folios in gold ETFs surged 3 times to 18.32 lakh within the period under review from 6.31 lakh in June 2020. Investors are steadily acknowledging the necessity for adding gold as a diversifier in their portfolio and this is often evident from the very fact that the category has received a net inflow of Rs 9,737 crore.
As a strategic asset in an investor’s portfolio, given its ability to act as an efficient diversifier, and alleviate losses during tough market conditions and economic downturns, Himanshu Srivastava, Associate Director Manager Research, Morningstar India.
Advance, Market Pulse’s Fahoum expects the continued fiscal will attract inflows in gold ETFs, especially if gold prices still show strength within the short-term. With the key global indices at all-time highs, any concerns around the pandemic or falling bond yields including higher inflation woes could induce caution within the investor population, which could further lend strength to gold prices and therefore the eventual inflows in gold ETFs.
Quantum Mutual Fund’s Mehta too expects inflows in gold ETFs to continue as investors have realized the importance of gold in one’s portfolio and as they still remain under-allocated from a portfolio perspective.
Gold ETFs will still remain a vehicle of choice thanks to their price efficiency and liquidity. Gold is taken into account as an asset that’s useful during emergencies and last year’s lockdown dried up much of the retail liquidity at that point.