MUMBAI: Rising gold prices have boosted inflows into the gold Exchange-Traded Funds (ETF).
With gold prices now trading above Rs 60,000 mark, gold ETFs have witnessed Rs 308 crore inflows in February this year, registering a rise of 26% compared to Rs 245 crore in the same month last year. Of the total inflows, the net inflows during the month were Rs 165 crore, as per the Association of Mutual Funds in India (AMFI) data. The number of folios grew by NEARLY 20,000 to 46.94 lakh in February.
Similar trend was witnessed in January as inflows grew by 57% to Rs 260 crore compared to Rs 166 crore in January 2022. Surge in the prices of yellow metal has attracted investors to ETFs of mutual funds. Gold prices crossed Rs 60,000 per 10 gram for the first time ever on March 20 driven by a series of negative news coming out from US and Europe.
Gold prices have risen around 8% so far this year as global economy is hit by a number of bad news ranging from banking crises in US and Europe and concerns that the US economy may slip into recession.
“Sustained rise in gold prices impact investors differently. There is a category of investors who wants to buy gold ETFs when prices are moving up, just like we see with equity investors.
While there is also another category of investors who sell gold ETFs to book profits. In February, we saw net inflows in gold ETFs showing that investors rushed to invest in gold lured by rising prices,” a fund manager of mutual fund company told this newspaper.
Experts expect prices to rally on expectations that US treasury yields will continue to remain under pressure as the Fed is expected to end its tightening due to easing inflationary pressures and an effort to shun a wider banking crisis. “Going ahead gold still looks lucrative in terms of ROI (return on investment) from a safety perspective where the inflation still remains high globally and interest cycle which is yet to ease, will also provide the push needed for gold to run and give 10-15% return in coming FY24.
The prices can easily touch 66,000-68,000 on base case performance before we reach the FY24 end next year,” said Jateen Trivedi, vice-President, research analyst, LKP Securities. “On the back of weak and uncertain performance in risky assets it is strongly advised to remain invested in Gold for further 10-15% returns on base case and 15-20% on bull case scenario,” he added.
Golden trend