Gold ETFs witnessed an inflow of Rs 921 crore in July, a surge of 86 per cent from the preceding month, as new investors rushed to add the precious metal in their portfolios in view of higher prices.
With this, net inflow in gold exchange traded fund or ETF category has reached to Rs 4,452 crore in the first seven months of the year, data with the Association of Mutual Funds in India (Amfi) showed.
According to the data, a net sum of Rs 921 crore was pumped into gold-linked ETFs last month, higher than the net Rs 494 crore in June.
The inflows meant assets under management (AUM) of gold ETFs climbed by 19 per cent to Rs 12,941 crore at the end of July, from Rs 10,857 crore at June-end.
Month-wise, investors put in a net Rs 202 crore in January, Rs 1,483 crore in February, but withdrew Rs 195 crore in March on profit-booking. Inflows resumed in April at Rs 731 crore, followed by Rs 815 crore in May.
“Gold prices continued to scale new highs on the back of weakness in the US dollar, tension between US and China and consistent rise in COVID-19 cases globally, which boosted its safe-haven appeal,” said Himanshu Srivastava, Associate Director Manager Research at Morningstar India.
“With all major economies staring at recession due to the spread of coronavirus pandemic, gold, expectedly, has emerged as one of the best performing asset classes and a preferred investment destination among investors,” he added.
Srivastava further said the surge in coronavirus cases has cast a doubt on the swift recovery hopes and investors continue to hedge their exposure to riskier assets by investing a portion of their assets in gold, as it is seen as a safe haven in times of uncertainty.
Harsh Jain, co-founder and COO of Groww, said the higher inflow is understandable as more investors are parking their cash in gold as a hedge against the market which is reeling from the effects of the economic shock from the pandemic.
Gold prices touching new highs has resulted in many new investors adding gold to their portfolios, he added. With its safe-haven appeal and being one of the better performing asset classes since 2019, Gold ETF category has been gaining significant traction from Indian investors. Since August 2019, the category has received a net inflow of Rs 4,644 crore.
Considering the threat posed by the coronavirus pandemic to the global economy and the markets, Srivastava said the segment may continue to gain traction from investors.
Gold functions as a strategic asset in an investor’s portfolio, given its ability to act as an effective diversifier and alleviate losses during tough market conditions and economic downturns, he added.