Gold exchange-traded funds (ETFs) in India experienced a notable decline in inflows in March, with net inflows plunging to Rs 2,266 crore, as per data from the Association of Mutual Funds in India (AMFI). This marked a sharp decrease from the previous month, where investors had injected Rs 5,255 crore into these funds. The slowdown was attributed to geopolitical uncertainties, particularly related to tensions involving the United States and Iran, impacting investor confidence.
Gold ETFs, which mirror the price of physical gold, are viewed as a convenient and tax-efficient investment avenue, eliminating the need for physical storage and security concerns associated with owning the metal. Currently, there are 25 such schemes accessible to Indian investors. The decline in inflows coincided with a significant correction in gold prices during March.
In the local market, gold prices fell approximately 11% in March, aligning with the drop in the benchmark Nifty index for the same period. This price decline seemed to dampen investor interest, despite gold traditionally being a sought-after safe-haven asset during uncertain times. Nonetheless, the total assets under management (AUM) of gold ETFs in India remained strong, standing at Rs 1.71 lakh crore as of March 31. This figure reflects the impact of earlier gains in bullion prices that supported overall asset growth.
Globally, the trend was more pronounced, with data from the World Gold Council indicating that gold ETFs witnessed outflows of $12 billion in March, marking the largest monthly withdrawal on record. These substantial outflows disrupted expectations for a robust quarter in terms of global gold ETF inflows. However, on a broader scale, gold ETFs globally achieved a seventh consecutive quarter of net inflows, according to the report.
