Gold exchange-traded funds (ETF) may be new for India, but are gaining in popularity as investors become aware of the benefits of investing in gold in a non-material form as opposed to holding it as jewellery. ETFs are instruments that trade like shares and are backed by physical holdings of the commodity. India is the world’s top consumer of gold, accounting for 20% of global demand. Indians traditionally invest in gold jewellery.Some key
facts and figures on India’s gold ETFs:
* India has eight gold ETFs listed with a total collection of more than 11 tonne, nearly double compared to last year.
* Mumbai-based Benchmark Mutual Fund was the first to start a gold ETF in 2007 and has the largest collection of more than five tonnes.
* The ETFs are listed on the National Stock Exchange and Bombay Stock Exchange and most of them have a share size of 1 gram.
* HDFC Mutual Fund is the newest to offer a gold ETF that started trading last week. ICICI Prudential, which has already collected funds, will list its ETF soon.
* Gold ETFs are a “must have”, according to mutual funds, who typically advise clients to allocate 10% of their portfolios to gold.
* More financial firms are expected to launch gold ETFs in their bid to offer a full basket of investment products to clients.
* India’s gold ETF collection is small compared to its approximately 700 tonnes of annual gold consumption, but is seen growing by at least 50% year-on-year, industry members say.
* Indians’ religious sentiment for gold is visible in ETF purchases as well, as volumes tend to rise on days that are considered auspicious for buying the metal, officials managing the ETFs say.
* Silver ETFs may not be too far away as Benchmark intends to launch it, though it has no date for it yet.