Gold ETF inflows decline in March as Middle East tensions weigh in

Gold ETF inflows in India fell sharply in March to Rs 2,266 crore from February’s Rs 5,255 crore, according to AMFI, as geopolitical tensions and price corrections dampened demand, though assets under management stayed strong at Rs 1.71 lakh crore

Mumbai: Gold exchange-traded funds (ETFs) in India witnessed a sharp slowdown in inflows in March as net inflows into gold ETFs more than halved to Rs 2,266 crore during the month, according to data released by the Association of Mutual Funds in India (AMFI) on Friday.

This marks a significant decline from February, when investors had poured a net Rs 5,255 crore into these funds. The drop came due to geopolitical uncertainties, particularly surrounding tensions involving the United States and Iran, weighed on investor sentiment.

---

Gold ETFs, which track the price of physical gold, are considered a convenient and tax-efficient investment option as they eliminate the need for storage and security concerns associated with holding the metal physically.

At present, there are 25 such schemes available to investors in India. The dip in inflows came at a time when gold prices corrected sharply. In the domestic market, gold prices fell around 11 per cent in March, mirroring the decline in the benchmark Nifty index during the same period.

The fall in prices appears to have dampened investor appetite, even as gold traditionally serves as a safe-haven asset during periods of uncertainty. Despite the slowdown in inflows, the total assets under management (AUM) of gold ETFs remained robust. As of March 31, the AUM stood at Rs 1.71 lakh crore. This figure also reflects the impact of earlier gains in bullion prices, which had supported overall asset growth. Globally, however, the trend was even more pronounced.

Data from the World Gold Council showed that gold ETFs recorded outflows of $12 billion in March, marking the largest monthly withdrawal on record. The sharp outflows disrupted expectations of what was anticipated to be the strongest quarter for global gold ETF inflows. Even so, on a broader horizon, gold ETFs globally have managed to log a seventh consecutive quarter of net inflows, as per the report.