Gold ETFs, a category that has witnessed robust inflows in the past two years, saw outflows of R41 crore in May, the first month of outflows this year. In the last 26 months, this is just the third instance where money from this category has gone out.
Equity funds saw inflows of R506 crore in May after four consecutive months of outflows. In contrast, gold ETFs saw inflows of R50 crore, R231 crore, R85 crore and R54 crore in April, March, February and January, respectively, this year.
The Sensex retreated 6.3% in May but had climbed 12% between January and April this year. Currently, a dozen gold ETF funds are in operation.
Gold ETFs as a category gave returns of about 34% for the financial year 2012, according to data compiled by Value Research. In the year to date, domestic gold prices have appreciated about 9%, nudging past R30,000 this month.
According to Thomson Reuters GFMS, one of the world?s leading economics consultancies in precious metals, the more-than-decade-long bull run in gold may come to end in early 2013 if prices touch new highs.
Market participants don?t expect major outflows from gold ETFs going forward as the global economy is not yet out of the woods and the yellow metal is perceived as a safe haven. Also, India may continue to face inflationary pressures and gold is seen as a hedge against inflation. At the end of May, the AUM for gold ETFs rose to R10,312 crore.
Interestingly, Singapore Mercantile Exchange (SMX) completed its first daily settlement of E-Gold futures based on the Indian gold price on Wednesday. The contract, which went live on June 1, saw a rise of nearly 3 times in its volumes with $16 million traded since its launch. According to the exchange, India is the largest physical market for gold accounting for around 27% of global consumer demand in 2011 totalling 933.4 tonne valued at $46.3 billion.
Net inflows into gold ETFs for FY12 amounted to R3,646 crore, a 59% increase over the amount of R2,289 crore garnered in the previous fiscal, data from industry body Amfi shows. The figure is 43 times more than the amount collected in FY09, the year the global financial crisis shook world markets.