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Gold ETFs see Rs 451 crore outflow in Jan due to profit-booking

(This story originally appeared in on Feb 10, 2022)

CHENNAI: Gold exchange-traded funds (ETFs) saw the highest-ever repurchase or redemption of Rs 671 crore in January 2022, leading to an outflow of Rs 451 crore. This was primarily driven by rising 10-year Indian government bond yields and expectations of a more hawkish US Fed stance. Redemption or repurchase refers to fund houses buying back ETF units from investors.

N S Venkatesh, CEO of the mutual fund body (AMFI), said, “In January, the gold price corrected on the back of anticipation towards the US Fed hiking the interest rate and surging crude oil price. This global correction in the yellow metal price impacted the Indian market, who decided to book their profit last month.”

The gold ETF folio saw an inflow of funds of Rs 313 crore in December 2021, according to AMFI data. It is common that investors withdraw from liquid funds for liquidity purposes. Going forward, the gold price is expected to stabilise at the current levels and hence and one does not expect any drastic movement in the coming months, Venkatesh added.

The net assets under management (AUM) as on January 31, 2022, declined 3% to Rs 565 crore as compared to the previous month. Its average net AUM for the month of January 2022 stood at Rs 18,183 crore.

The total number of gold ETF folios stood at 34.6 lakh in the last month. On a month-on-month basis, the gold ETF has added two lakh more new folios — from 32.1 lakh folios in the last month.

Lakshmi Iyer, CIO (debt) & head (products) at Kotak Mahindra AMC, said “Gold ETF repurchase in the last month was the highest ever since 2021. This move could have been asset allocation exit from customers, when both equity and gold saw correction in trade last month.”

According to the World Gold Council report, Indian gold ETFs in volume terms saw outflows to the extent of one tonne in January 2022 to stand at 37 tonne. Globally, the gold ETFs added 46 tonne ($2.7 billion) to global AUM in January 2022, the largest monthly tonnage inflows since May 2021.