Gold ETF folios have seen a surge of 41% H1 2021

Higher mobilisation along with an increase in folio numbers indicates that gold as an asset class has been attracting a greater number of investors

Gold ETF folios have seen a surge of 41% H1 2021
We expect the yellow metal prices to touch levels of Rs 49,500 in the short term and Rs 52,000 per 10 grams in the next three months.

Gold exchange traded funds (ETF) are seeing a sharp surge in inflows. More investors are adding gold to their portfolios as part of diversification. This is evident from the folio data in gold ETF which surged by almost 10% in June to 18.32 lakh from 16.68 lakh in May.

The category received a net inflow of Rs 359.66 crore in June, which was higher than Rs 287.86 crore in May.

From January 2020 till June 2021, the category has received a net inflow of Rs 9,737.14 crore.

Despite the fact that gold has delivered a negative return this year, every month has seen net inflows. Domestic gold prices have corrected around 6% this year so far.

On the other hand, the folio count of gold ETF has jumped 41% in the last six months to 18.32 lakh in June, with inflows touching Rs 3,106 crore.

Even on a quarter-on-quarter basis, there is a huge jump. Assets under gold ETF have jumped in the June quarter to Rs 48,477 crore against Rs 42,707 crore in the March quarter.

Traditionally, gold is considered a safe haven given its ability to act as an effective diversifier and alleviate losses during tough market conditions and economic downturns.

Experts say that during the challenging investment environment over the last few years, gold emerged as one of the better performing asset classes, thus proving its effectiveness in investors’ portfolio. Expectedly, this has attracted investors’ interest, and continues to do so, which is evident from the consistent net inflows into the Gold ETF category.

Himanshu Srivastava, associate director – manager research, Morningstar India, commenting on Gold ETFs based on AMFI monthly data for June 2021 said, “The redemption amount was higher in June compared to May signifying that a few investors would have chosen to book profit given gold prices continue to tread at elevated levels. However, at the same time, the amount mobilised too shot up sharply in June as against May.”

Higher mobilisation along with an increase in folio numbers, experts say indicate that gold as an asset class has been attracting a greater number of investors.

World Gold Council’s recent report on gold ETFs also mentioned, “Overall, the positive flows are coming in spite of significant gold price weakness in the latter half of the month on the heels of a relatively hawkish Federal Reserve (Fed) outlook, suggesting that investors may have taken advantage of the lower price level to gain long gold exposure”.

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