After witnessing net outflows in the months of January and February this year, the Gold ETF category witnessed net inflows of Rs 205 crore in March. However, the month of April proved to be the defining one as the category received net inflows to the tune of Rs 1100 crore. This was the highest monthly net inflow into the category after February 2020 when it received net inflow of Rs 1,483 crore.
“Continuation of geopolitical tension due to the war between Russia and Ukraine, surge in crude prices and concerns over surge in inflation globally as well as domestically have once again diverted investors’ focus on yellow metal, which draws its appeal as safe-haven during difficult environment and as a hedge against inflation,” said Himanshu Srivastava, Associate Director – Manager Research, Morningstar India, commenting on AMFI’s monthly data for April 2022.
Gold prices also came-off their highs and went through a downward trajectory in April, which provided investors a good buying opportunity. Moreover, uncertainty and challenges faced by the equity markets would have also prompted investors to diversify their portfolio by adding some exposure to gold ETF, which in the current scenario appears to be a relatively attractive investment option.
Gold, with its superlative performance over the last few years, has attracted significant investor interest. The consistent surge in their folio numbers is a testimony of the same. During the FY 2021-22, the folio numbers in Gold ETFs surged from 13 lakh in March 2021 to 42 lakh in March 2022, an increase by almost 223%.
Between March and April, the number of folios has surged further by 120,662 folios to 43.62 lakhs, an increase of 3%. Since Jan 2020 till April 2022, the Gold ETF category has received a net inflow of Rs 12,050 crore. This indicates that gold has made inroads into the investor’s portfolio as part of their asset allocation requirement like never before.
“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. This is where it draws its safe-haven appeal. During the challenging investment environment posed by Covid and economic downturn, gold emerged as one of the better-performing asset classes, thus proving its effectiveness in investors’ portfolio. This aspect has not gone unnoticed by investors,” added Srivastava.
