Investors continue to exit from gold ETFs, withdraw Rs 8.35 bn in FY18

Investors remained bearish on gold exchange-traded funds (ETFs) as they pulled out Rs 8.35 billion from the instrument in 2017-18, making it the fifth consecutive financial year of outflow.

The outflow has razed the asset under management (AUM) of gold funds by over 12 per cent in the just concluded financial year, according to latest data available with Association of Mutual Funds in India (Amfi).

"Barring couple of months, India has seen net negative flows in gold ETFs from February 2013. Even in terms of inflows, from triple-digit crore of inflows until 2012, it has now dwindled to low single-digit and almost nil in some months. Domestic gold's annualised returns is lower than even savings bank rate today," said Vidya Bala, head of mutual fund research at Fundsindia.com.

In addition, investors are now shifting from traditional asset classes such as real estate and gold to financial asset class like equities.

Trading in gold ETF segment has been lukewarm during the last five years. It witnessed an outflow of Rs 7.75 billion, Rs 9.03 billion, Rs 14.75 billion and Rs 22.93 billion in 2016-17, 2015-16, 2014-15 and 2013-14, respectively.

However, the segment had witnessed an infusion of Rs 14.14 billion in 2012-13.

On the other hand, equity and equity-linked savings scheme (ELSS) saw an infusion of Rs 1.7 trillion in the last financial year.

The asset base of gold funds dropped to Rs 48.06 billion at the end of March 2018 from Rs 54.80 billion at the end of March 2017.

Gold ETFs are passive investment instruments that are based on gold prices that invest in gold bullion. There is a complete transparency on the holdings of an ETF because of its direct gold pricing.

The mutual fund sector has 14 gold-based schemes, which have been in the market since 2006-07.