Gold ETFs register Rs 570-cr outflow in 2018; asset base drops 6%

Investors continued to pull out money from gold exchange-traded funds (ETFs) and withdrew a little over Rs 570 crore in 2018, making it the sixth consecutive year of outflow from such products.

The outflow meant asset under management (AUM) of gold funds plunged by 6 per cent from 2017 to Rs 4,571 crore in 2018, data with Association of Mutual Funds in India (Amfi) showed.

Over the last few years, retail investors have been putting in more money into equities, as compared to gold ETFs, mainly on account of strong return.

Equity and equity-linked saving schemes saw an infusion of Rs 1.27 lakh crore last year, while overall mutual fund schemes witnessed an inflow of Rs 1.54 lakh crore.

As per Amfi data, a net sum of Rs 571 crore was pulled out of 14 gold-linked ETFs last year as compared to Rs 730 crore in 2017.

It had witnessed an outflow of Rs 942 crore, Rs 891 crore, Rs 1,651 crore and Rs 1,815 crore in 2016, 2015, 2014 and 2013, respectively. In 2012, gold ETFs saw an inflow of Rs 1,826 crore.

"International gold prices have remained in the range of USD 1050-1350 per ounce after falling off the highs of USD 1,900/ounce in 2011-13. Although domestic gold prices have inched up more recently in 2018 due to rupee weakness, but investors have been quite disillusioned with gold as an asset class for the last 5 years.

"This coupled with the fact that equity markets have delivered significant returns during this period, has led to a steady outflow of money from gold funds and ETFs. We believe investors should look at allocating money to gold as a portfolio hedge and risk diversifier," Morningstar Director, Manager Research, Kaustubh Belapurkar, said.

Experts also said that lacklustre performance by real estate and gold and low interest rates on traditional savings instruments have contributed in pushing investor flows into equities.

Gold ETFs are passive investment instruments that are based on price movements and investments in physical gold.

Essel Mutual Fund CIO Viral Berawala, however, said, "The inflows are expected to increase as we head towards a period in the second half of the year with considerable macroeconomic events with uncertain outcomes. Central banks around the world are also continuing to add gold to their reserves. The latest IMF release shows Kazakhstan, Brazil, India and Russia all having additional purchases in November."