Are Gold ETFs losing the interest of investors?

In the time of this pandemic, gold has outperformed in several ways by benefitted the small to the large scale businesses in many ways. 

This yellow metal gave a return of 32% in past one year. Many investors participated in the gold rally by opting for gold ETFs. The gold ETF category attracted a net inflow of around INR 6,244 crore. And its assets under management got double in last year.

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But, according to the recent data compiled from the Association of Mutual Funds in India shows that the investment in ETFs is on the decline. Chirag Mehta, Senior Fund Manager, Quantum AMC says, “In the midst of the uncertainty created by the pandemic, global investment demand for gold drove up prices to new highs of around $2000/ounce as investors chose to park their money in the relatively safer asset class”. 

But, Mehta believes that the slowdown in inflows into gold ETFs can be of two reasons. One reason is the rise in the prices of gold in the past 2 years. So, investors are waiting to stabilize the gold prices. The other reason is, investors are getting attracted to other short-term investment plans.

AMFI (Association of Mutual Funds of India) data also shows that the registration of new folios or accounts in gold ETFs is on the decline. Till the month of August 2020, the monthly growth in folios was 5 %. But, now it has come down to 2-3% in September and October month. 

Some of the experts believe that despite the declining rate of new folios. The registration rate will be going to increase, once the gold prices will get stabilize. Conditions like this are occurring because of the global recession. The government is introducing many policies to stabilize the situation. 

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