Gold?s safe-haven appeal will likely drive up assets of gold exchange-traded funds (ETFs) in India by almost three-fold to around R10,200 crore by the end of this month, as investors flee riskier assets on fears of collateral damages to world economy from a deepening European debt crisis, pushing up the metal prices to near-record levels, industry executives said on Friday.
The assets of gold ETFs were to the tune of R3,516 crore by December 2010. The assets already surged to R9,568 crore as of November 30, compared with R3,464 crore a year earlier, according to the data by the Association of Mutual Funds in India. ETFs are the investment instruments that trade like shares but are backed by physical holdings of the commodity. They are traded on the National Stock Exchange and Bombay Stock Exchange and offer investors an opportunity to participate in the gold market without taking physical delivery.
The rise in assets of gold ETFs reflects growing acceptance of such products among Indians, the world?s largest buyer of jewellery, as a hassle-free and safe instrument to invest.
?Rural India usually looks upon jewellery purchases as a sort of investment. That?s because the majority of rural population isn?t properly connected with the banking or the financial systems. While gold?s investment value is well established, particularly in times of crisis, apprehension about gold ETFs are gradually diminishing, which is a good sign,? said a senior executive with a Mumbai-based asset management company, who didn?t want to be identified.
With choices broadening with the introduction of several gold investment products, people are increasingly drawn towards ETF, as it is in demat form and easy to handle, another executive said.
Gold prices have risen on an average of 15% during the peak demand season of September through March over the past ten years, a senior executive at Kotak Mahindra Asset Management Company had said earlier. ?So assets of the ETFs are going to rise significantly,? he had added.
Although gold is off its peak, it is up around 12% so far in 2011 and heading for an 11th consecutive annual gain?the longest winning streak in at least nine decades?outperforming commodities, equities as well as treasuries. On a short term, the precious metal has given an average of more than 20% returns in the past four years.
Gold rallied to a record $1,921.15 an ounce on the London Metals Exchange on September 6 and prices averaged around $1,706 in the third quarter of 2011, rising 39% from a year earlier, the World Gold Council data showed.
Spot gold inched up 0.3% on Friday to $1,610.80 an ounce intraday, well on course for a weekly rise of 0.7% after two straight weeks of losses. US gold edged up 0.1% to $1,612.80, marching towards a weekly gain of nearly 1%.
The country first launched gold ETFs in 2007 and currently has a dozen ETF schemes. Fund houses, including UTI Asset Management, Kotak Mahindra Mutual Fund, Benchmark Asset Management, Reliance Capital Asset Management, Quantum Mutual Fund, Religare Mutual Fund and SBI Mutual Fund, offer gold ETFs.
Gold down R50; silver up R150
New Delhi, Dec 23: Gold on Friday extended losses for the second straight session and lost another R50 to R27,990 per 10 gm, due to sluggish demand at prevailing higher levels amid a weakening global trend.
However, silver found scattered buying support from industrial units and recovered by R150 to R52,650 per kg.
Traders said besides subdued domestic demand at existing higher levels, reports of a weakening global trend pushed down gold prices further. Gold of 99.9 and 99.5% purity fell further by R50 each to R27,990 and R27,850 per 10 gm, respectively.
PTI
