Gold exchange traded funds (ETF) witnessed a net outflow of ₹396 crore last month, making it the first withdrawal after March 2023, owing to profit booking.
Despite the decline, the asset under management (AUM) of gold funds rose 5 per cent on an annual basis to ₹32,789 crore at April-end from ₹31,224 crore in the preceding month, according to data with the Association of Mutual Funds in India (Amfi).
As per the data, Gold ETFs saw a net withdrawal of ₹396 crore in April compared with an inflow of ₹373 crore in the preceding month.
The last time this asset class witnessed net outflow was in March 2023, withdrawing ₹266 crore.
“In INR terms, gold has done fairly well over the last year but dwarfs in comparison to how equities have fared. Given this backdrop, flows in the Gold ETF category have been somewhat patchy relative to the equity asset class. That said, investors could have opted to book some profits in this segment which has resulted in the asset class witnessing net outflows despite the rise in prices,” Melvyn Santarita, analyst, Morningstar Investment Research India, said.
Recently gold prices in dollar terms as well as rupee terms have scaled new highs. With ongoing geopolitical tensions, US inflation still higher than the desired number, the appeal of gold as a safe haven and hedge against inflation is expected to continue, he added.
In 2023, Gold ETFs witnessed an inflow of ₹2,920 crore, which was way higher than the ₹459 crore inflow seen in 2022. The attractiveness of gold as a safe haven and a hedge against inflation enhanced significantly during the year.
Investors turned to this traditional safe haven owing to rising inflation, subsequent interest rate hikes and geopolitical events, seeking a secure investment option.
Gold, with its superlative performance over the last few years, has garnered substantial investor interest and the consistent increase in folio numbers serves as a testament to its attractiveness.
The folio numbers in gold ETFs rose by over 1 lakh to 51.84 lakh in the month under review from 50.61 lakh in March 2024. This indicates a growing inclination among investors towards funds related to gold.
“Investing in gold ETFs offers unparalleled advantages including liquidity, cost-effectiveness, and security,” Vishal Jain, CEO, Zerodha Fund House said.
