Golden Opportunities

Gold ETF continues to gain traction, recording a massive net inflow of ₹921.19 cr in July against just ₹494.23 cr in June

- Himali Patel

Consider this, despite a dwindling global demand, gold-backed Exchange Traded Funds (ETFs) broke all records, emerging as a safe haven during crisis.

For the month of July 2020, the Indian Gold ETFs recorded a massive net inflow of ₹921.19 crore against the ₹494.23 crore in June, registering a stellar growth of 86 per cent shows the data by Association of Mutual Funds in India (AMFI). This year so far, Gold ETF category has received a net inflow of ₹4,451.9 crore. (See the table: Gold ETF)

The World Gold Council (WGC), in its July report had stated that the first half (H1) of world gold demand was down by 6 per cent at 2,076 tonnes (t). Interestingly despite the global demand being down, the inflows into Gold ETFs recorded a breaking 734t. indicating the H1 inflows have even surpassed the 2009 annual record of 646t.

So, what factors led to this trend where massive inflow in Gold ETF in mutual fund category was seen, given the low demand for gold? And will Gold ETF continue to grow? Let’s take a look:

A Gold ETF is a commodity-based Mutual Fund (MF) that mainly tracks the price of asset like physical domestic gold. Gold ETF units represent the physical gold in dematerialised paper form. In India, Gold ETF represents 99.5 per cent purity assurance of physical gold bars. The capital gains from sale of Gold ETFs are taxed at par with physical gold at 20 per cent.