Gold exchange-traded funds see 5th consecutive month of inflows in August

Inflows in August came despite gold price coming off its all-time high, though it has risen 30% in the first eight months of the year

Gold-backed exchange-traded funds (ETFs) recorded a fifth consecutive month of inflows in August. Mutual fund (MF) schemes mimicking returns of the yellow metal saw investor flows of Rs 908 crore, taking their year-to-date tally to Rs 5,360 crore.

Inflows in August came despite gold price coming off its all-time high, though it has risen 30 per cent in the first eight months of the year. The average gold price for the month was five per cent lower than the previous month. Interestingly, August was the first month of 2020 when gold investments yielded negative returns.

“Gold price came off its all-time high in August, after witnessing almost an uninterrupted rally this year. This probably provided a good entry point for investors to invest in yellow metal,” said Himanshu Srivastava, associate director — manager research, Morningstar India.

 

 

There are about 11 gold ETF schemes offered by domestic MFs. The average net assets under management (AUM) for August for such schemes stood at Rs 13,418 crore, data provided by industry body Association of Mutual Funds in India (Amfi) showed. The AUM has increased 2.4 times so far this year. At the end of December, the combined AUM of the 11 gold ETFs was Rs 5,516 crore.

Gold’s safe-haven investment tag has got a boost this year thanks to the economic uncertainty caused by the Covid-19 pandemic. “With all major economies staring at recession due to the spread of the pandemic, gold, with its safe-haven appeal, has emerged as one of the best-performing asset class and a preferred investment destination among investors. Moreover, as the surge in coronavirus cases have cast a doubt on the swift recovery hopes, investors continue to hedge their exposure to riskier assets by investing a portion in gold,” said Srivastava.