Gold prices have reached new record highs, but Gold ETFs experienced a notable slowdown in February, with monthly inflows dropping by 47.22% to Rs 1,979 crore, compared to Rs 3,751 crore in January.
Despite this decline, the inflows in Gold ETFs have still seen a 99% year-on-year increase, from Rs 997 crore in February 2024. This shift signals a complex market scenario, where profit-taking after gold’s price surge and attractive opportunities in the equity markets are reshaping investor behaviour, according to an ET report.
“The decline in inflows can be attributed to profit booking, as gold surged to an all-time high last month, prompting investors to lock in gains,” explained Nehal Meshram, Senior Analyst – Manager Research at Morningstar Investment Research India.
“Additionally, equity market corrections presented attractive buying opportunities, leading some investors to shift focus from gold ETFs to equities.” he added.
Gold ETFs still managed to deliver an average return of 3.34% in February, with UTI Gold ETF emerging as the top performer, returning 3.70%. Other ETFs such as Kotak Gold ETF, Zerodha Gold ETF, and DSP Gold ETF provided 3.54% returns. Invesco India Gold ETF and Tata Gold ETF returned 3.08% and 2.48%, respectively.
Nehal also pointed out that the expectation of potential interest rate cuts by global central banks has dampened the urgency for safe-haven investments like gold. Despite the decline in inflows, gold continues to be an essential portfolio diversifier, especially with global economic conditions remaining uncertain. Gold’s role as a hedge against market instability is expected to maintain its appeal in the coming months.
The assets under management (AUM) for Gold ETFs grew by 7%, reaching Rs 55,677 crore in February, compared to Rs 51,839 crore in January. On a yearly basis, AUM surged nearly 95%, up from Rs 28,529 crore in February 2024.
Ajay Garg, CEO of SMC Global Securities, added, “The gold ETFs’ net inflows have decreased, but their AAUM grew by 15% to Rs 55,001.75 crore. This rise is due to a sharp rally in gold prices, which can also fuel the investor’s interest in gold ETFs in the near future.”
According to the latest data from the Association of Mutual Funds in India (AMFI), only one new Gold ETF scheme was launched in February, with Union Gold ETF collecting Rs 11 crore.
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