Gold ETFs have seen an 88% rise year-to-date (YTD) to Rs 1,232.99 crore in September 2024, up from Rs 657.46 crore in January, the same report states.
“Gold ETFs (exchange-traded funds), which have witnessed a more than seven-fold increase in AUM (Assets under management) in the last five years, from Rs 5,613.22 crore in September 2019 to Rs 39,823.50 crore in September 2024, seem to be the flavor of the season ahead before the Dhanteras,” ICRA Analytics said.
Gold ETFs have been gaining increasing popularity among investors due to liquidity, transparency and global price alignment, which is evident with inflows to the fund increasing by a whopping 2,695%, from 44.11 million. of rupees in September 2019 to Rs 1,232.99 crore in September 2024.
“Investors prefer to invest in gold ETFs due to their liquidity, transparency, profitability and ease of trading compared to physical gold. The increased activity in these funds is also driven by the prospects of an interest rate cut by the US Federal Reserve in the coming months,” said Ashwini Kumar, senior vice president and head of market data at ICRA Analytics.
As rising geopolitical tensions increase the appeal of bullion as a “safe haven”, investors prefer to park their funds in gold ETFs rather than investing in physical gold as there are no problems in storing it. Additionally, there are concerns about purity and theft when investing in physical gold, which is not the case with gold ETFs. There are as many as 17 gold ETF schemes in the market and the average one-year return was in the range of 29.12%. while the 3 and 5 year returns were 16.93% and 13.59% respectively. India is estimated to be the second largest consumer of gold in the world after China. There were high expectations gold demand during the festive season following the government’s import duty cut in July 2024. However, there are concerns that high gold prices could affect investor confidence as this could reduce the purchasing power of many buyers .
Additionally, purchasing physical gold carries its fair share of risks, including storage, theft, and impurities, which affect returns. Gold ETFs are comparatively safer as they are governed by strict regulations and traded on exchanges in real time.
(Disclaimer: The recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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