After a gap of seven years, gold ETFs see inflows in 2019

Investors infused Rs 16 crore in gold exchange-traded funds (ETFs) in 2019, after pulling out money from safe-haven assets in the past six years, on fears of a slowdown in the global market and volatility in equity and debt markets.

Going ahead, the segment is likely to gain more traction from investors due to the recent increase in tensions between the US and Iran and the threat to global economy, Himanshu Srivastava, senior analyst manager research at Morningstar Investment Adviser India, said.

The inflows meant asset under management (AUM) of gold funds surged 26 per cent to Rs 5,768 crore at the end of December 2019 from Rs 4,571 crore at the end of December 2018, data from the Association of Mutual Funds in India (AMFI) showed. Over the past few years, retail investors invested more money into equities as compared to gold ETFs, mainly on account of strong returns.

According to AMFI data, investors put in a net sum of Rs 16 crore in 14 gold-linked ETFs last year, while they pulled out Rs 571 crore in 2018. The safe-haven asset had witnessed an outflow of Rs 730 crore, Rs 942 crore, Rs 891 crore, Rs 1,651 crore and Rs 1,815 crore in 2017, 2016, 2015, 2014 and 2013, respectively.

Gold ETFs had seen an inflow of Rs 1,826 crore in 2012. Fears of a slowdown in the global market have helped gold find its safe-haven appeal back in the recent times. This has triggered a sharp rally in its prices in 2019 thus catching investors fancy.

According to a World Gold Council (WGC) report, gold finished the year 2019 strong in December 2019 with global gold-backed ETFs seeing US$19bn of net inflows and growth in all regions throughout the year. The global holdings reached all-time highs of nearly 2,900 tonnes in the 4th quarter, and global gold-backed assets under management (AUM) grew at 37 per cent.

Gold-backed ETF holdings bounced back in December 2019 as funds added 13.8 tonnes, driven almost entirely by Europe, adding $672 million driven by funds in France, Germany and Switzerland. North American flows and other regions were mostly flat while Asian funds gave up 5.1 per cent of assets

Gold realized its strongest price change in 10 years and finished the year 18.4 per cent higher at $1,515/oz remaining at or near all-time highs in every major G10 currency apart from the US  Dollar and Swiss franc.

Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at shekhar.ghosh@indoasiancommodities.in.

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