Gold ETFs see outflows for second month as equity markets extend gains

Gold exchange-traded funds (ETFs) offered by domestic mutual funds saw second straight month of net outflows as equity markets extended their winning run.

In August, gold ETFs logged outflows of Rs 38 crore, extending their two-month outflows to nearly Rs 500 crore.

Meanwhile, the assets under management of gold ETFs slipped below Rs 20,000 crore for the first time in five months.

Between March and June, gold ETFs had seen healthy inflows of nearly Rs 1,650 crore amid sell-off in the equity market. However, a sharp rebound in stock prices has once again shifted the focus from gold. The number of folios with fold ETF funds fell from 4.64 million in July to 4.61 in August.

“While investors draw some comfort around expectations of inflation peaking, there is continued uncertainty as macro indicators signal global slowdown. As interest rates continue to rise, impacting gold prices, investors prefer to park their money in other assets like equity and short-term debt instruments, as opposed to gold. This trend has been witnessed globally as well, with gold ETFs posting significant outflows on the back of lower gold prices. Bearing in mind gold ETFs are used as a means to diversify investor portfolio and are a hedge against market risks, it’s important to remember that this asset class only constitutes around 5-10 per cent of an investor’s portfolio,” observes Kavitha Krishnan, senior analyst-manager research, Morningstar India.