Gold exchange traded funds (ETFs) continue to attract investor attention and have garnered net assets worth Rs 683 crore in November, as correction in the prices of the yellow metal and Omicron worries pushed investors towards safe haven assets.This was higher than the net inflow of Rs 303 crore in October and Rs 446 crore seen in September. Prior to this, the segment saw a net inflow of Rs 24 crore in the previous month, data with the Association of Mutual Funds in India (Amfi) showed.
“Gold ETFs saw a prominent inflow for the month too. As the scare of a new variant of SARS-CoV-2, Omicron is looked like a potential cause of worry for the economy now, investors could be resorting to the traditional form of investment as a hedge from market volatility,” Priti Rathi Gupta, Founder, LXME, said.
Himanshu Srivastava, Associate Director – Manager Research, Morningstar India, said the correction in gold prices in November and concerns over the emergence of Omicron variant of coronavirus enhanced the appeal of safe haven assets such as gold.With the latest inflow, the net infusion in Gold ETF category has reached to Rs 4,500 crore so far this year.
The segment witnessed just one month of net outflow, which was in July 2021 of around Rs 61.5 crore. This points towards investors’ liking for yellow metal as part of their investment portfolio.The latest inflow helped in pushing the number of folios in the category by 10 per cent to 29.29 lakh in November, from 26.6 lakh in October in the preceding month.
The number indicates that gold has made inroads into the investor’s portfolio as part of their asset allocation requirement like never before. Investments into ETFs that track the yellow metal have been witnessing a steady uptick since August 2019. However, the asset class witnessed net outflows of Rs 141 crore in November 2020, Rs 195 crore in February 2020 and Rs 61.5 crore in July 2021.
Srivastava said that gold functions as a strategic asset in an investor’s portfolio, given its ability to act as an effective diversifier, and alleviate losses during tough market conditions and economic downturns.”During the challenging investment environment in the recent past, gold emerged as one of the better performing asset classes, thus proving its effectiveness in investors’ portfolio,” he said.
This aspect has not gone unnoticed by investors, which is evident from rather consistent net inflow into the Gold ETF category, he added. The assets under management (AUM) of gold ETFs surged to Rs 18,104 crore at the end of November from Rs 17,320 crore at October-end.