Gold ETF volumes take a big leap

Rise 70-200%, courtesy soaring prices of the yellow metal.

The recent rally in gold prices seems to have generated a lot of buying interest in gold exchange-traded funds (ETFs). This is evident from the fact that the volumes of such ETFs have doubled since last week.

Though gold prices have been rising of late, they touched a peak of $1,000 per oz on September 8. With investor interest shifting to this asset class, volumes of almost all gold ETFs have surged sharply in the range of 70-200 per cent in the last one week. The traded turnover on exchanges too has jumped in the same proportion.

Benchmark’s Goldbees, the most heavily traded gold ETF, saw its volumes moving up to 47,860 units on Wednesday, a sharp jump of 77 per cent from 26,937 units a week before. Similarly, UTI’s Goldshare saw over 100 per cent increase from 3,283 units to 6,603 units, Quantum’s gold ETF witnessed a 149 per cent rise from 1,026 to 2,556 units and SBI GETS registered a 214 per cent jump in volumes from 2,457 to 7715 units.

Gold ETFs are open-ended mutual fund schemes that invest in standard gold bullion (0.995 purity). The investor’s holding is denoted in units, which gets listed on a stock exchange. These are passively managed funds and are designed to provide returns that would closely track the returns from physical gold in the spot market.

The dollar slipped to its lowest in a year against a basket of major currencies, pushing gold prices. Higher oil prices are also fuelling gold.

Experts say that with the festive season approaching, gold buying may get yet another boost from investors. “With inflationary concerns expected to resurface next year onwards, a lot of investors are betting on gold as a hedge against inflation,” said a fund manager who did not wish to be named.

Chirag Mehta, fund manager, Quantum Gold ETF, said: “Investors who were waiting on the sidelines have decided to join the rally, leading to a surge in volumes. A lot of investors are also concerned about the rally in equities and commodities which, they fear, may not be sustainable. Hence, they are moving to gold.”

Rajan Mehta, Executive Director of Benchmark Mutual Fund, said: “The belief going around is that there is a Chinese put option in gold and hence there is less downside and more upside.” According to the World Gold Council (WGC), Indian households own about 15,000 tonnes of gold, comprising around 10 per cent of global stocks. Currently, there are six gold ETFs, one each by Benchmark, UTI, Kotak, Quantum, SBI and Reliance Mutual Fund.

Inspite of gold prices remaining highly volatile over the last few months, gold ETFs as a category are still giving returns of 33.46 per cent per annum, the highest annualised return by any asset class. According to the latest figures from the Association of Mutual Funds in India (Amfi), gold ETFs received net inflows worth Rs 15 crore in August. The industry currently has Rs 904 crore of assets under management in gold ETFs.