Gold ETFs log Rs 2,400-cr inflow in Sept quarter

New Delhi: Gold exchange-traded funds (ETFs) saw staggering net inflows of over Rs 2,400 crore in the three months ended September 30, as investors continued to hedge their exposure to riskier assets due to higher economic uncertainty resulting from Covid-19. In comparison, investors had infused Rs 172 crore in this asset class in July-September 2019, according to the data available with the Association of Mutual Funds in India (Amfi).

The category has been among the better-performing ones so far this year and received a net inflow of Rs 5,957 crore. As per the data, a net sum of Rs 2,426 crore was pumped into gold-linked ETFs in three months ended September 30, 2020. Divam Sharma, co-founder at Green Portfolio, said returns generated by gold ETF’s over the last one year have increased number of investors buying the asset.

“Gold investment picked up due to higher economic uncertainty resulting from Covid-19,” said Harsh Jain, co-founder of Groww. Investors expected to see very volatile markets world over, and in such times, investment in very safe assets like gold always shoots up. Even though now, the markets have mostly recovered and reached the pre-pandemic levels, uncertainty remains high going forward, Jain said.

“We have seen a re-emergence of higher Covid-19 cases in many parts of Europe and USA. Many countries are imposing lockdowns in a staged manner again. This is leading to a higher economic uncertainty again. In such conditions, higher investment in gold assets is expected,” he added.

Gopal Kavalireddi, head of research at FYERS, said the US presidential elections outcome will have a bearing on the performance of equities over the next couple of months. This could prompt investors to reverse their choice and hedge their investments with gold ETFs. Month-wise, investors put in a net Rs 202 crore in January, Rs 1,483 crore in February, but withdrew Rs 195 crore in March on profit-booking.

Inflows resumed in April at Rs 731 crore, followed by Rs 815 crore in May, Rs 494 crore in June, Rs 921 crore in July, Rs 908 crore in August and Rs 597 crore in September. Despite the slight fall in inflows of gold ETF in September, Sharma said the outlook for the remaining part of the year looks positive. “With the Covid-19 cases rebounding globally; continued liquidity and lower interest rates from central banks globally; and markets nearing the pre-Covid-19 levels, investors will continue to invest surplus liquidity in safer assets like gold,” he added.

He, further, said investors looking to invest in gold can choose between gold ETF, gold mutual funds, sovereign gold bonds, and physical gold. The inflows led assets under management (AUM) of gold funds surging to Rs 13,590 crore at the end of September 2020, from Rs 5,613 crore at the end of September 2019. Gold-backed ETFs are passive investment instruments that are based on price movements and investments in physical gold.