Gold ETFs Experience Significant Inflow Drop Despite Record High Prices

In a surprising turn of events, Gold ETFs witnessed a substantial 47.22% decrease in monthly inflows in February, dropping to Rs 1,979 crore from Rs 3,751 crore in January. This decline comes even as gold prices soared to new heights, indicating a complex market scenario where profit-taking and attractive equity market opportunities are influencing investor behavior.

Market Analysts Weigh In

Nehal Meshram, Senior Analyst at Morningstar Investment Research India, attributes the decline to profit booking following gold's surge to an all-time high. Meshram also noted that equity market corrections have presented attractive buying opportunities, leading some investors to shift their focus from gold ETFs to equities.

Performance and Outlook

Despite the downturn, Gold ETFs delivered an average return of 3.34% in February, with UTI Gold ETF leading the pack at 3.70%. The expectation of potential interest rate cuts by global central banks has also played a role in dampening the urgency for safe-haven investments like gold. Nonetheless, gold's role as a hedge against market instability is expected to maintain its appeal amidst ongoing global economic uncertainties.

Assets under management for Gold ETFs saw a 7% increase in February, reaching Rs 55,677 crore, a near 95% year-on-year surge. Ajay Garg, CEO of SMC Global Securities, highlighted the sharp rally in gold prices as a key factor in the growth of AAUM to Rs 55,001.75 crore, suggesting a potential resurgence in investor interest in gold ETFs.

Only one new Gold ETF scheme was launched in February, with Union Gold ETF collecting Rs 11 crore, according to the latest data from the Association of Mutual Funds in India (AMFI).

Disclaimer: The opinions, analyses and recommendations expressed herein are those of brokerage and do not reflect the views of The Times of India. Always consult with a qualified investment advisor or financial planner before making any investment decisions.