The slightly low inflow in May compared to the preceding month could be attributed to profit booking.
Gold price came off its highs towards the second half of May on the back of positive news with regards to the US government raising the debt ceiling, thereby providing some buying opportunity, particularly after a sharp rally it witnessed since March this year, Melvyn Santarita, Analyst-Manager Research, Morningstar India, said.
“With gold prices still trading at high levels, some investors would have chosen to book profits or take on risk on approach with a view that central banks would pause further rate hikes.
“This view seems to be materialising. That said, pertinent risks still engulf developed economies, and therefore, over the course of the month, investors flocked to gold ETFs, which is considered as a safe haven during uncertain times,” Santarita added.
According to the data, gold-linked ETFs saw an inflow of Rs 103 crore last month, which helped in raising the assets under the management of such funds to Rs 23,128 crore at the end of May from Rs 22,950 crore at the end of April. Gold, with its superlative performance over the last few years, has attracted significant investor interest, and the consistent surge in its folio numbers is a testimony to the same. The folio numbers in gold ETFs surged by 15,000 to 47.28 lakh in the month under review from 47.13 lakh in April. This shows that investors have become more inclined towards gold-related funds.
In the entire financial year 2022-23, inflows into gold ETFs stood at Rs 653 crore, a decline of 74 per cent year-on-year from the Rs 2,541 crore infusion seen in 2021-22. This drop was mainly due to profit booking in this asset class and investors’ preference for equities. However, the asset base of gold ETFs and investors’ account or folio numbers increased in the last fiscal year.
Gold ETFs, which track the domestic physical gold price, are passive investment instruments that are based on gold prices and invest in gold bullion.
In short, gold ETFs are units representing physical gold, which may be in paper or dematerialised form. One gold ETF unit is equal to 1 gram of gold and is backed by physical gold of very high purity. They combine the flexibility of stock investment.
