Gold ETFs see inflow of Rs 200-cr in Jan; highest in 7 years

Geopolitical tensions in different parts of the globe and slowdown in global economy led investors to opt for safe-haven like gold over the last one year.

Gold exchange-traded funds witnessed a net inflow of Rs 200 crore in January, making it the highest infusion in seven years, as geopolitical tensions in different parts of the globe and slowdown in global economy led investors to opt for the safe-haven.

This also marks the third consecutive monthly inflow in gold exchange-traded funds (ETFs).

According to latest data available with Association of Mutual Funds in India (Amfi), a net sum of Rs 202 crore was pumped in gold-linked ETFs in January as compared to Rs 27 crore in the preceding month.

Prior to that, the safe-haven asset saw an infusion of Rs 7.68 crore in November.

However, it had seen a pull out Rs 31.45 crore in October.

Such funds saw an infusion of Rs 44 crore in September and Rs 145 crore in August.

The latest monthly inflow was the highest one since December 2012, when gold ETFs saw a net infusion of Rs 474 crore.

"Gold ETFs witnessed a strong net inflow in the month of January.

“This was significantly higher than Rs 27 crore, which the segment received in the month of December.

“Geopolitical tensions in different parts of the globe and slowdown in global economy led investors to opt for safe-haven like gold over the last one year," said Himanshu Srivastava, senior research analyst - manager research, Morningstar Investment Adviser India.

"The appeal of yellow metal enhanced recently on the back of rising concerns over the severity of the coronavirus outbreak.

“As the investors weigh the fallout of the epidemic, they have increased their allocation to gold for its safe-haven appeal," he added.

The inflows meant asset under management (AUM) of gold funds surged 7.6 per cent to Rs 6,207 crore at the end of January from Rs 5,768 crore at the end of December.

Gold backed ETFs are passive investment instruments that are based on price movements and investments in physical gold.

Overall, mutual fund houses witnessed an inflow of Rs 1.2 lakh crore last month as compared to an outflow of Rs 61,810 crore in December 2019.

This inflow led to AUM of the 44-player industry rising to Rs 27.85 lakh crore by January-end from Rs 26.54 lakh crore at the end of December.

Photograph: Heinz-Peter Bader/Reuters