Gold ETFs Register ₹570 Crore Out-flow in 2018

Gold Silver Reports (GSR) – The outflow meant asset under management (AUM) of gold funds plunged by 6% from 2017 to ₹4,571 crore in 2018, data with Association of Mutual Funds in India (Amfi) showed.

Investors continued to pull out money from gold exchange-traded funds (ETFs) and withdrew a little over ₹570 crore in 2018, making it the sixth consecutive year of outflow from such products.

Over the last few years, retail investors have been putting in more money into equities, as compared to gold ETFs, mainly on account of strong return.

Equity and equity-linked saving schemes saw an infusion of ₹1.27 trillion last year, while overall mutual fund schemes witnessed an inflow of ₹1.54 trillion.

As per Amfi data, a net sum of ₹571 crore was pulled out of 14 gold-linked ETFs last year as compared to ₹730 crore in 2017.

It had witnessed an outflow of ₹942 crore, ₹891 crore, ₹1,651 crore and ₹1,815 crore in 2016, 2015, 2014 and 2013, respectively. In 2012, gold ETFs saw an inflow of ₹1,826 crore.

“International gold prices have remained in the range of $1050-1350 per ounce after falling off the highs of $1,900/ounce in 2011-13. Although domestic gold prices have inched up more recently in 2018 due to rupee weakness, but investors have been quite disillusioned with gold as an asset class for the last 5 years.

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“This coupled with the fact that equity markets have delivered significant returns during this period, has led to a steady outflow of money from gold funds and ETFs. We believe investors should look at allocating money to gold as a portfolio hedge and risk diversifier,” Morningstar Director, Manager Research, Kaustubh Belapurkar, said.

Experts also said that lacklustre performance by real estate and gold and low interest rates on traditional savings instruments have contributed in pushing investor flows into equities.

Gold ETFs are passive investment instruments that are based on price movements and investments in physical gold.

Essel Mutual Fund CIO Viral Berawala, however, said, “The inflows are expected to increase as we head towards a period in the second half of the year with considerable macroeconomic events with uncertain outcomes.

“Given the macroeconomic picture, gold prices should move up gradually and prove to be a useful portfolio diversification tool and thereby helping you to reduce overall portfolio risk,” he added.

Central banks around the world are also continuing to add gold to their reserves. The latest IMF release shows Kazakhstan, Brazil, India and Russia all having additional purchases in November.”

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Chirag Mehta, Senior Fund Manager, Alternative Investments at Quantum AMC, said that the financial, economic and political trends in many countries are increasingly getting more supportive of higher gold prices.

“The world continues to remain in state of great disequilibrium, both with respect to the global economy and geopolitics as well.The fallout of the geopolitics globally seems to now cap the downsides in gold.

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Neal Bhai has been involved in the Bullion and Metals markets since 1998 – he has experience in many areas of the market from researching to trading and has worked in Delhi, India. Mobile No. - 9899900589 and 9582247600

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