The inflow of Gold ETFs to Continue

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India is in a festive mood and the season has uplifted shopping. Diwali and Christmas are yet to come. On the back of this rising demand, inflow will continue.   

Gold ETFs are bought and sold on the stock markets to make investments in gold.  

Investors were choosing equity-based and debt funds. Indian equities rallied effectively.  

Gold exchange-traded funds (ETFs) attracted ₹446 crores in September. This was significantly more than the total inflow of ₹24 crores recorded in August. A net withdrawal of ₹61.5 crores occurred in July.  

As of now, a net inflow of ₹ 3,515 crores has been received by the gold ETFs. Only in July, there was a net outflow.  

The number of folios in the category has increased by 14 per cent. In July, the folios were only 21.46 lakh and they became 24.6 lakh in September.   

The rally in global equities and the rally in Indian equities have made investors cautious about a further rise in prices.  

Countries like the US, the UK and Canada faced outflows in gold exchange-traded funds in September 2021. On the other hand, India witnessed a profound inflow of gold exchange-traded funds. This indicates that the beginning of the festive season in India is the reason behind this market hype.  

Investing in gold is a selective choice. Investors prefer it over paper currency for its comparative stability.   

Gold is regarded as a safe asset during times of economic crisis and when equity markets are undergoing an unstable process. It is a significant diversifier and pacifies losses during hard economic situations. Also, there is a fear of increasing inflation.   

Changes in the gold price over the last few months gave good opportunities for buyers. From August 2019, there was an up-gradation in the ETFs investments. Since June 2021, the price has seen only a downward drop.  

Some downfalls include ₹195 crore rupees outflow in February 2020, ₹141 crore outflow in November 2020 and ₹61.5 crore rupees outflow in July 2021.  

The Assets Under Management (AUM) of gold exchange-traded funds Rs. 16,750 towards the end of July. It was Rs. 16,350 towards the end of August. It was 16,337 at the end of September. We see that there is a dip.  

“With festivities approaching, one can expect the upcoming demand of gold investments in one portfolio leading to a higher inflow for the upcoming months,” LXME’s Gupta said. 

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