Investors Find Safe Haven, Pump 45% More Into Gold ETFs

Gold exchange traded funds (ETFs) recorded an inflow of Rs 625 crore in January, a 45 per cent hike over what investors had pumped in a month back.

The inflow pushed the asset base of gold funds by 22 per cent to Rs 14,481 crore at the end of January from Rs 14,174 crore at the end of December, data available with the Association of Mutual Funds in India showed.

After witnessing a net outflow of Rs 141 crore in November 2020, the Gold ETF category is once again blipping aloud on the investor radar.

Himanshu Srivastava, Associate Director – Manager Research, Morningstar India, says the gold prices have come off their all-time highs touched last August. January also saw a fair bit of correction in its prices. “This, along with expectation that gold may do well going ahead, provided a good buying opportunity to investors, which resulted in net inflows into the category in January.”

According to Juzer Gabajiwala, Director, Ventura Securities, the investors flocked to gold in search of higher returns. “Gold is being considered for investment as equity markets have run up and on fixed income, the returns are very low. Hence, we believe, there is attraction to the yellow metal,” he says.

Barring March and November, Gold ETFs saw a net inflow through the entire 2020. These instruments attracted Rs 6,657 crore last year – far higher than just Rs 16 crore seen the year before. In the last two years, the category has received a robust net inflow of Rs 48,159 crore.

“Indian investors love gold. However, the last year’s performance of gold means people’s interest in the yellow metal has piqued further. At any fall, people want to invest more in this presumably safe asset class,” says Shweta Jain, CFP-Founder of Investography and author of My Conversations with Money. “Retail investors should accept that they may not see returns like last year every year and would have to stay invested for longer to see such returns. Having a 10 per cent allocation and not more protects investors and their expectations.”

[With inputs from PTI]