Gold Exchange Traded Funds (ETFs) has seen continuous outflows every month since June 2013. But now with the recent surge in gold prices and gold being considered as ‘safe haven’ during volatile times, fund houses expect a slowdown of outflows from gold ETFs.
Despite Indians being buyers of gold, they have invested in gold ETFs when gold prices were going up and redeeming their units when the prices were low and missing the upside rally. In the last three years when there has been outflows from gold ETFs, the gold prices have risen by around 19.7%. On Monday, MCX Gold prices closed at `31,248 per 10 gm.
Gold ETFs, which invest in gold and gold bullion, are managed by various fund houses and currently have assets under management (AUM) of `6,159 crore as on May 2016, says data from Association of Mutual Funds in India (Amfi). “There has been continuous outflows from the gold ETFs in the past few years, but with the surge in gold prices and positive returns posted by gold ETFs, we expect outflows to come down,” says Lakshmi Iyer, chief investment officer (Debt) & Head Products, Kotak Mahindra Asset Management.
Since June 2013 gold ETFs have seen outflows of over `4,584 crore. However, many market participants believe that outflows from the gold ETFs have slowed down. “If we look at the data, the outflows have fallen sharply in the past few months though its negative. Average outflows in last financial year was `75 crore, while it used be `122 crore in FY 15 and 174 crore in FY 14. But like equity, here also investors got their timing wrong and exited when prices of gold were low,” said another fund manager from top fund house.
With the recent gold rally post Brexit vote and global uncertainty, fund managers believe that gold will continue to remain ‘safe haven’ for retail investors. “Gold will continue to be ‘safe haven’ for investors and with such sharp rally in the past few days there might be some pull-back. But going forward there will be more participation from investors,” concluded Iyer.