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Informist, Thursday, Oct. 17, 2024

 

MUMBAI – Gold exchange-traded funds are attracting investors ahead of the Dhanteras festival this year, as 17 listed gold ETF schemes have delivered an average one-year return of over 29%, according to a report by ICRA Analytics, a wholly-owned subsidiary of ICRA Ltd. The gold funds have delivered a three-year return of 16.9% and five-year return of 13.6%.

 

These funds are gaining popularity among investors due to liquidity, transparency, and global price alignment. With escalating geopolitical tensions boosting the 'safe-haven' appeal of the bullion, investors are preferring to park their funds in gold ETFs against investing in physical gold as there is no hassle of storing, ICRA Analytics said in its report.

 

"Investors favour investing in Gold ETFs due to liquidity, transparency, cost-effectiveness, and ease of trading compared to physical gold. The heightened activity in these funds is also driven by the prospects of an interest rate cut by the US Federal Reserve in the coming months," Ashwini Kumar, senior vice president and head market data, ICRA Analytics, said.

 

From INR 6.57 billion in January, the inflows in gold ETFs have surged over 88% to INR 12.33 billion till September. The asset under management has surged seven-fold in the last five years from INR 56.13 billion in September 2019 to INR 398.23 billion in September this year, it said.

 

LIC MF Gold ETF gave the maximum returns of 29.97%, 17.47% and 13.87% on one-year, three-year and five-year basis, respectively. However, the returns are marginally lower when compared with average returns of 30.13%, 18.03% and 14.88% over one-year, three-year and five-year periods on physical gold, it said.

 

"Investors with a short to medium term investment horizon may consider investment through Gold ETFs. A buy on dips strategy in this case may help investors to capitalise on temporary correction in prices," Kumar said. "Given the current market dynamics where equities are showing mixed trends, a modest allocation to gold may serve as a hedge against inflation and market volatility which may help balance risks in an optimum manner."

 

The analytics firm said that there are always concerns about purity and theft while investing in physical gold, which is not the case with gold ETFs. They are comparatively safer as they are governed by tight regulations and are traded on exchanges on real-time basis.  End

 

Reported by Sandeep Sinha

Edited by Ashish Shirke

 

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