Net inflows in gold ETFs after 3 months

After three months of outflows, gold exchange-traded funds (ETFs) saw net inflows in May, primarily due to the decline in gold prices. According to data from the Association of Mutual Funds in India (Amfi), gold ETFs witnessed net inflows of Rs 113 crore.

The price of standard gold fell from Rs 15,665 per 10 grams in March to Rs 14,935 per 10 grams on May 30, which prompted many investors to enter the market again. Lakshmi Iyer, head, fixed income Kotak Asset Management Company, said, “Some of these inflows also came due to the collections by SBI Gold ETF, which closed on April 28.”

Benchmark Mutual Fund Executive Director Sanjiv Shah said, “There was also some increase in participation from retail investors in May.” While February and March witnessed outflows of Rs 25 crore and Rs 23 crore respectively, April saw an outflow of another Rs 4 crore. Gold ETFs are based on the rates of gold and traded on the stock exchanges. They allow the investor to participate in the price movement of gold without actually buying or selling physical gold. They have given the best returns among all mutual fund categories in the past year. That is, annual returns from gold ETFs have been 17.11 per cent, followed by gilt (medium and long term) at 14.16 per cent and debt (medium term) at 10.92 per cent. Their returns have slipped in the last three months into the negative zone (-3.99 per cent) because of the phenomenal rise in the stock market and fall in gold prices.

However, despite good returns, this category has not attracted too much money, only Rs 849 crore till May, because investors need to have a demat account to transact. Also, brokers do not aggressively market these products to their clientele because of very low fees (0.05 to 0.10 per cent).