Gold ETFs record Rs 942-cr outflow in 2016

The outflow meant AUM of gold funds plunged by more than 4% during the period under review

Investors continued to pull out money from gold exchange-traded funds (ETFs) in 2016 and withdrew Rs 942 crore, making it the fourth consecutive year of outflow from such products.

The outflow meant asset under management (AUM) of gold funds plunged by more than 4 per cent during the period under review.

According to the latest data available with Association of Mutual Funds in India (Amfi), a net sum of Rs 942 crore was pulled out of 14 gold-linked ETFs last year as compared to Rs 891 crore in 2015.

It had witnessed an outflow of Rs 1,651 crore and Rs 1,815 crore in 2014 and 2013, respectively. In 2012, gold ETFs saw an inflow of Rs 1,826 crore.

Retail investors have been putting in more money into equity and debt mutual funds over the last few years compared to gold ETFs.

Equity and equity-linked saving schemes saw an infusion of around Rs 55,000 crore and debt funds attracted about Rs 1.4 lakh crore.

Overall, mutual fund schemes have witnessed an inflow of Rs 2.86 lakh crore.

"A banking crisis that emanates from Europe would not remain confined to Europe in today's interconnected financial world. This could lead to concerns on banks health in the US and elsewhere. This can suddenly translate to weakness in banking stocks and spillover to overall risk-off sentiment in financial markets.

"The rush to safety will see bond yields moving lower faster than inflation expectations, resulting in lower real interest rates. Falling rates would also curtail rising hopes for further rate hikes from the US Federal reserve and therefore be positive for gold," Quantum Mutual Fund Senior Fund Manager-Alternative Investments Chirag Mehta said.

The asset base of gold exchange-traded funds dropped to Rs 5,519 crore at the end of December 2016 from Rs 5,773 crore in December-end 2015.