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Informist, Wednesday, Dec. 11, 2024

 

By J. Navya Sruthi

 

MUMBAI – Net inflows into gold exchange-traded funds fell sharply in November as gold prices were lower due to a firm dollar, analysts said. However, net inflows into silver ETFs rose in November due to industrial demand, analysts said.

 

According to data released by the Association of Mutual Funds in India on Tuesday, net flows into gold ETFs in November were INR 12.57 billion, down nearly 36% from the record high of INR 19.61 billion in October. However, on a yearly basis, the net inflows in November were nearly four times higher. In November 2023, the net inflows into gold ETFs were INR 3.33 billion. The gross inflows into gold ETFs in November were INR 14.78 billion, significantly lower than INR 20.9 billion in October.

Fund managers say the fall in net inflows in gold ETFs is "nothing unusual". The fall in inflows was because of a correction in gold prices in November, and going ahead, geopolitical tensions are likely to support gold prices and flows in gold ETFs, Ajay Kedia, director at Kedia Advisory, said.

 

Further, US president-elect Donald Trump's policies, which are seen as inflationary, will also support gold prices, as gold is used as a hedge against inflation, said Abhishek Bisen, head of fixed income at Kotak Mutual Fund. He also said that continued purchases by central banks and de-dollarisation will also support gold prices, hence leading to continued inflows.

 

The value of net assets under management of 18 gold ETFs at the end of November was INR 442.45 billion, nearly 1% lower than INR 445.45 billion in October, the AMFI data showed.  This was due to mark to market losses as gold prices on the Multi Commodity Exchange of India fell nearly 3% in November to close at INR 76,374 per 10 gm and those on COMEX fell 3.5% and closed at $2,664.8 per ounce.

 

Gold prices fell after rising continuously from August till September, due to a firm dollar index and the re-election of Trump as president of the US, Kedia said.

 

As on Nov. 30, the number of folios in gold ETFs was 6.3 million, up from 5.9 million a month ago. The redemption and repurchase for the month was INR 2.22 billion, higher than INR 1.25 billion in October.

 

On the other hand, net inflows into silver ETFs rose 44% to INR 9.29 billion in November from INR 6.43 billion in October due to industrial demand, analysts said. The gross inflows in November were INR 10.49 billion, against INR 8.04 billion the previous month. 

 

However, the net assets under management of 12 silver ETFs at the end of November were INR 123.34 billion, slightly up from INR 123.31 billion. This was again attributed to mark to market losses as silver prices fell around 6% on the MCX and closed at INR 88,881 per kg in November and those on COMEX fell 8% and closed at $30.55 per ounce.

  

The number of folios under silver ETFs as on Nov. 30 was 582,990, against 446,557 a month before. The redemption and repurchase was INR 1.19 billion, down from INR 1.61 billion in October, per the data.

 

Moving forward, silver prices are likely to get a boost from hopes of a stimulus in China, which is a top consumer of the white metal, analysts said. China Monday said it would adopt an "appropriately loose" monetary policy in 2025 as Beijing tries to spur its economy and also flagged plans for more stimulus measures. China's Central Economic Work Conference, which ends on Thursday, is likely to provide more insights into plans for stimulus to the market.  End

 

US$1 = INR 84.83

 

Edited by Ashish Shirke

 

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