Gold ETFs record Rs 1,300 cr outflow in first 10 mths of FY'15

Gold exchange traded funds (ETFs) seem to have lost favour among investors as mutual fund managers pulled out nearly Rs 1,300 crore from these products in the first 10 months of current fiscal mainly due to poor returns offered by such schemes.

According to the latest data available with Association of Mutual Funds in India (AMFI), gold ETFs witnessed an outflow of Rs 1,290 crore during April-January period of the current fiscal (2014-15) by MFs.

In the same period of 2013-14, gold ETFs had seen withdrawals of Rs 1,967 crore by MF managers.

The outflow led to assets under management (AUM) of gold funds plunging by more than 19 per cent during the period.

Market experts attributed the outflows to poor returns offered by gold schemes and regulatory restrictions on import of the precious metal during the period.

"Strong dollar, weak crude oil, slow economic growth in Euro zone and issues of Swiss franc are the key reasons to keep the demand for yellow metal low," Geojit BNP Paribas Head (Research ) Alex Mathews said.

"Gold ETFs have seen outflow as gold prices are correcting and equities have given good returns to investors," Quantum AMC Fund Manager (Commodities) Chirag Mehta said.

He further said that rate of outflow has slowdown in the past few months and recent measures taken by Reserve Bank will help in attracting investors.

Recently, RBI removed ban on import of gold coins and medallions. Gold funds, which saw an outflow throughout the year, are expected to lure investors on the back of steps taken by RBI, say analysts.

Currently, the mutual fund sector has 14 gold-based schemes with a total asset base of Rs 7,245 crore. It stood at about Rs 9,000 crore at the end of January 2014.