In Delhi, Exchange-traded funds (ETFs) that invest in gold, which are seen as a safe haven during difficult times, continued to shine in May with a net inflow of Rs 103 crore. The change happens after the asset class experienced a net inflow of Rs 124 crore in April. Prior to that, according to data from the Association of Mutual Funds in India (Amfi), investors withdrew Rs 266 crore from Gold ETFs in March.
Profit booking may have contributed to the little lower inflow in May compared to the previous month.
Following a sharp rally that began in March of this year, the gold price fell from its highs in the second half of May as a result of good news that the US government would raise the debt ceiling, Melvyn Santarita, Analyst-Manager Research, Morningstar India, said.
Some investors may have decided to book profits or take a riskier approach in the hope that central banks would halt additional rate hikes while gold prices were still trading at high levels.
Due to its exceptional performance over the past few years, gold has drawn a lot of investor interest; the steady increase in its folio numbers is proof of this.
Gold ETF folios increased by 15,000, from 47.13 lakh in April to 47.28 lakh in the reviewed month. This demonstrates that investors' preferences for gold-related funds have increased.
Inflows into gold ETFs totaled Rs 653 crore for the full fiscal year 2022–23, down 74% from the Rs 2,541 crore injection observed in 2021–22. Profit taking in this asset class and investors' preference for equities were the key causes of this decline. However, investors' account or folio numbers and the asset base of gold ETFs both grew over the previous fiscal year.
Gold ETFs are passive investment products based on gold prices that invest in gold bullion and track the domestic physical gold price.
In a nutshell, gold ETFs are securities that reflect physical gold, either in the form of paper or in a dematerialized form. One gram of actual, ultra-high purity gold serves as the backing for each unit of the gold ETF. They mix stock investment flexibility.