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Gold Exchange Traded Funds (ETFs) saw inflows of Rs 2,920 crore in 2023, up almost 6-fold from the Rs 459 crore in 2022. Investors plumped for the yellow metal fund as inflation raged above comfort levels and interest rates rose.

The asset base of gold ETFs and investors’ accounts experienced growth in the year, according to the latest data issued by the Association of Mutual Funds in India (Amfi).

The ETFs attracted the most funds (Rs 1023 crore) in August 2023 when inflation was at its peak in 16 months.
The attractiveness of gold as a safe haven and a hedge against inflation enhanced significantly during the year. Investors turned to this traditional safe haven amid rising inflation, subsequent interest rate hikes, and geopolitical events, seeking a secure investment option.
“Higher inflation and subsequent hike in interest rates augured well for gold. Moreover, heightened geopolitical tension triggered due to the war between Israel and Hamas made it an attractive and safe investment destination for investors,” Himanshu Srivastava, Associate Director – Manager Research at Morningstar Investment Research India, said.

Vishal Jain, CEO at Zerodha Fund House, said that Indians have had a centuries-long affinity with physical gold while investment products such as Gold ETFs have been slower in terms of adoption.
“Over the years, investors’ comfort with digitization, ease of access, and a wider palette of products to choose from has been a reason for Gold ETFs becoming an option. Given the volatility we have seen this is a good move given gold is a must-have in every portfolio,” he added.
The inflow played a crucial role in driving the assets under management (AUM) of gold funds up by over 27 per cent, reaching Rs 27,336 crore by the end of December 2023, compared to Rs 21,455 crore a year earlier.
Gold, with its superlative performance over the last few years, has garnered substantial investor interest and the consistent increase in folio numbers serves as a testament to its attractiveness.
During the year, the folio numbers in gold ETFs saw a notable increase, rising by 2.73 lakh to reach 49.11 lakh in December 2023 from 46.38 lakh in December 2022. This indicates a growing inclination among investors towards funds related to gold.
(With inputs from PTI)