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Informist, Wednesday, Feb. 12, 2025

 

By J. Navya Sruthi

 

MUMBAI – Net inflows into gold exchange-traded funds rose to an all-time high in January as concerns about a global tariff war have increased the appeal of the safe-haven asset, experts said. Continuous depreciation of the rupee against the dollar has also boosted flows into gold ETFs.

 

According to data released by the Association of Mutual Funds in India Wednesday, net flows into gold ETFs in January were at an all-time high of INR 37.51 billion, rising almost five times from INR 6.40 billion in December. In January 2024, the net inflows were at INR 6.60 billion. The gross inflows into gold ETFs in January were INR 38.81 billion, significantly higher than INR 8.85 billion in December.

 

"There is a movement into gold ETFs, which is very positive because people are looking at it as a safe-haven investment," AMFI Chief Executive Venkat Chalasani said at a press conference Wednesday. "And you also see that there is a solid positive mark to market. If you look at INR 445.95 billion with the total AUM (assets under management) in December, it moved to INR 518.39 billion... So people are looking at that as there is a safe haven, and therefore some amount of money is possibly going towards gold ETF."

 

Gold prices rose 6.7% in January and ended the month at INR 81,888 per 10 gm on the Multi Commodity Exchange of India, tracking prices on COMEX. Prices rose as the looming threat of tariffs by US President Donald Trump boosted demand for the safe-haven metal. Following Trump's announcement of 25% tariff on steel and aluminium imports, effective Mar. 12, gold prices rose to a new high of INR 84,925 per 10 gm on the MCX and $2,968.5 per ounce on COMEX Tuesday.

 

The value of net assets under management of 18 gold ETFs at the end of January was INR 518.39 billion, over 16% higher than INR 445.95 billion at the end of December, AMFI data showed. On Jan. 31, the number of folios in gold ETFs was 6.5 million, up from 6.4 million a month ago. The redemptions and repurchases for the month were INR 1.30 billion in January, lower than INR 2.45 billion in December.

 

"Another factor which contributed (to) gold ETF inflows in recent months is the absence of new sovereign gold bonds from the government," said Satish Dondapati, ETF fund manager at Kotak Asset Management Co.

 

Further, the depreciation of the rupee against the dollar led to flows into gold ETFs in January, said Abhishek Bisen, head of fixed income at Kotak Mutual Fund. The currency depreciation will aid demand for gold as it is an ideal investment option to withstand volatility in the equity and fixed income markets. "We can expect the trend continuing in the medium term," Bisen said. 

 

"In the long run, the mounting sovereign debt burden mostly in the global north poses sustainability risks, reinforcing gold's role as a critical hedge for both individual and sovereign portfolios," said Vikram Dhawan, head of commodities and fund manager, Nippon India.  End

 

US$1 = INR 86.89

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

With inputs from Sandeep Sinha

Edited by Rajeev Pai

 

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