Inflows in Gold ETF hit 16-month high at Rs 1,028 cr in Aug

Gold exchange-traded funds (ETFs) attracted Rs 1,028 crore in August, making it the highest inflow in 16 months, amid continued hikes in interest rates in the US, which led to a slowing down in growth rate there. With this, the year-to-date inflow in the category has reached more than Rs 1,400 crore, data with the Association of Mutual Funds in India (Amfi) showed.

Apart from inflow, the asset base of Gold ETFs and investors’ account or folio numbers increased in the period under review.

According to data, gold-linked ETFs have seen an inflow of Rs 1,028 crore in August. This came following an inflow of Rs 456 crore in the segment in July.

Before that, Gold ETF saw inflow to the tune of Rs 298 crore during the April-June period after three quarters of consecutive outflow. The category saw a withdrawal of Rs 1,243 crore in the March quarter, Rs 320 crore in the December quarter, and Rs 165 crore in the September quarter.

The month of August witnessed the highest monthly inflow into Gold ETFs since April 2022 when the category attracted Rs 1,100 crore on the back of the Russia-Ukraine war.

Flows into Gold ETFs have been subdued since then as the US Federal Reserve embarked on its tightening cycle.
“As the end to the Fed’s tightening cycle is now coming close, prospects for gold are looking good. The metal has held its ground despite US yields and the US dollar being on an upward trajectory lately. A potential US recession, central bank gold buying, geopolitical tensions, rising US debt levels are all supporting interest in the precious metal,” Ghazal Jain, Fund Manager – Alternative Investments at Quantum Mutual Fund, said. Moreover, gold prices in recent times have come off from its all-time high levels, thereby providing some buying opportunity, particularly after a sharp rally it witnessed since March this year, Melvyn Santarita, Analyst – Manager Research at Morningstar India, said.

“With the continued hike in interest rates in the US, inflation still higher than expectations, and growth rate slowing down, the appeal of gold as a safe haven and hedge against inflation is expected to continue,” Santarita added.

Gold, with its superlative performance over the last few years, has attracted significant investor interest and the consistent surge in its folio numbers is a testimony of the same.

Investor accounts in Gold ETFs climbed by 20,500 folios to 47.95 lakh in August from 47.75 lakh in the preceding month. This shows that investors have become more inclined toward gold-related funds.

Further, the assets under management of Gold ETFs surged by over 4 per cent to Rs 24,318 crore in August from Rs 23,330 crore in the preceding month.

Gold ETFs, which track the domestic physical gold price, are passive investment instruments that are based on gold prices and invest in gold bullion. In short, Gold ETFs are units representing physical gold which may be in paper or dematerialised form.

One Gold ETF unit is equal to 1 gram of gold and is backed by physical gold of very high purity. They combine the flexibility of stock investments and the simplicity of gold investments.