Gold Exchange Traded Fund (ETF) witnessed a net withdrawal of Rs 396 crore in April, making it the first major outflow witnessed by the asset class after March 2023. The outflow occurred as investors booked profits from their investments in Gold ETFs. The previous outflow from the asset class amounted to Rs 266 crore in March 2023.
Gold ETFs are exchange traded funds that track the price of domestic physical gold. They invest the money in gold bullion. As per the AMFI website one Gold ETF unit is equal to 1 gram of gold and is backed by physical gold of very high purity.
Even amid the rise in outflows led by profit booking, the assets under management (AUM) of Gold ETFs have surged five percent, according to the data by AMFI (Association of Mutual Funds in India). The total AUM under Gold ETFs stood at Rs 32,789 crore at the end of April compared to Rs 31,224 crore in the previous month. The data by the apex body for mutual funds also showed that even as the Rs 396 crore outflow occurred in April, there was an inflow of Rs 373 crore in the preceding month.
According to analysts, gold has performed very well in the last year in Indian rupee terms, but compared to equities, it has underperformed. The Gold ETF category has been somewhat patchy relative to the equity asset class and the profit booking by the investors may have resulted in the asset class witnessing net outflows despite the rise in prices.
Gold has always been considered a safe haven for investors against inflation and other geopolitical tensions. As per an analyst at Morningstar Investment Research India, the gold prices in US dollar terms as well as Indian rupee terms have scaled new highs.
In 2023, Gold ETFs witnessed an inflow of Rs 2,920 crore, growing from a Rs 459 crore inflow seen in 2022. Additionally the increased number of investors (folio numbers) is a testament to the attractiveness of the asset. 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.
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