While the equity markets have rewarded patient investors, both retail as well as high net worth individuals (HNIs) believe they could earn from the bullion market. Of late, they are increasingly opting to invest in gold exchange traded funds (ETFs) as a result assets under management of gold ETFs have almost doubled since January 2010.
According to the data provided by the Association of Mutual Funds in India (Amfi), total assets of gold ETFs in October stood at Rs 3,097 crore compared to Rs 1,425 crore in January. ?The flows can be attributed to the surging gold prices. It’s not just in India, globally too, many investors are opting for gold ETFs,? said Benchmark Mutual Fund executive director Sanjiv Shah said.
Gold ETFs have seen steady rise in their assets over the last few years. In 2008 total assets of gold ETFs were only Rs 7,300 crore which increased to over Rs 11,100 crore in 2009 and at the end of October, gold ETFs assets stood at Rs 20,600 crore.
Gold ETFs are open-ended mutual fund schemes that invest in standard gold bullion. The investor?s holding is denoted in units, which gets listed on a stock exchange. These are passively managed funds and are designed to provide returns that would closely track the returns from physical gold in the spot market. In the last one year, gold ETFs have given returns of over 12%.
Market participants also say with inflationary concerns expected to remain for few more months, many investors are betting on gold as a hedge against inflation. Value Research Online CEO Dhirendra Kumar said, ?As long as gold prices surges we will witness demand in the gold ETFs and Indian appetite is also high for gold. However, compared to investment in equity there is less participation in gold ETFs. But it is likely to increase in the coming years.?
Few participants believe that more and more investors are now investing in gold through ETFs. Achal Kumar Gupta, MD of SBI Mutual Fund says, ?We are looking at trend where several investors are investing in gold ETFs. Apart from that, in the current year we also saw four new funds being launched which also boosted the assets of gold ETFs.?
