Gold ETFs See Massive ₹3,300 Crore Investment Surge in October

Mumbai, November 4 – October proved to be a booming month for gold exchange-traded funds (ETFs), drawing in an impressive net investment of approximately ₹3,300 crore. This surge in investor activity comes in the wake of a nearly 12 percent decrease in gold prices over the past six months, prompting many to seize what they perceived as an attractive buying opportunity as the Diwali festival approaches.

Growing Interest in Gold ETFs

The assets under management (AUM) in gold ETFs climbed significantly from ₹1.58 lakh crore in April to nearly ₹1.91 lakh crore by the end of October. This steady increase indicates a rising interest among investors who are looking to diversify their portfolios with gold-linked financial instruments.

The World Gold Council, in its most recent quarterly report, anticipates that gold demand will remain robust during the ongoing festival and wedding seasons, further spurred by continued purchasing from central banks. These institutions have been actively adding gold to their reserves at historically high levels, a trend that may bolster gold prices in the coming year.

Performance of Gold ETFs

Since the last Diwali on October 20, 2022, gold ETFs have shown a commendable average return of 9.22 percent. Among the 22 gold ETF schemes available, Nippon India Gold ETF BeES led the pack with a remarkable return of 12.58 percent, closely followed by Invesco Gold ETF at 12.50 percent and ICICI Prudential Gold ETF at 12.39 percent. This performance has become a topic of interest for many who are contemplating investing in gold through ETFs.

Furthermore, data from Value Research highlights that the gold funds segment has yielded impressive returns over various timeframes: 18.64 percent over one year, 31.90 percent over three years, and 23.15 percent over five years, as of October 26, 2023.

Advantages of Investing in Gold ETFs

Gold ETFs offer a range of advantages compared to traditional physical gold. They eliminate hassles associated with making charges, storage expenses, and concerns around theft. Instead, ETF units are stored electronically in demat accounts, which can be easily traded on stock exchanges like the NSE and BSE at current market prices. Additionally, ETFs allow investors to accumulate gold in manageable increments, making it accessible for a wider array of investors.

What Lies Ahead for Gold Investors

Pankaj Mathpal, the Founder and CEO of Optima Money, expresses a positive outlook for gold based on emerging investment demand and expectations of a slight decrease in supply. However, he warns that fluctuating higher interest rates, increasing bond yields, and a stronger US dollar might add some volatility to the market.

Mathpal advises investors to approach gold purchases with caution. Instead of making large lump-sum investments, he recommends a more gradual accumulation strategy using ETFs. He emphasizes viewing gold as a means of diversifying one’s investment portfolio rather than as a vehicle for short-term trading.