Gold ETF inflows climb nearly three times amid enhanced investor interest, equity market volatility

The monthly data released by the Association of Mutual Funds in India shows that net inflows in Gold ETFs have climbed to ₹1,256.72 crore in November 2024, growing by nearly three times from ₹333.37 crore in November 2023.

Nippon India Gold ETF is the frontrunner among Gold ETFs with assets under management (AUM) totalling ₹15,247.92 crore, as per a Moneycontrol report. SBI Gold ETF and HDFC Gold ETF follow ₹2,468.54 crore and ₹2,287.29 crore, respectively, the report added.

The markets in the country and abroad have been experiencing drastic volatility, and several other factors including the Russia-Ukraine escalation have kept the demand for gold up. Gold as a safe haven has managed to maintain its appeal, and the ongoing wedding season in India is fueling the yellow metal’s demand as expected. Gold ETFs have also been gaining investor interest in the past few years as technology and metals converge, effectively complementing each other.

Gold ETFs have seen a net inflow of ₹25,409 crore since January 2020, which shows investors’ enhanced interest in the segment, the Moneycontrol report quoted Himanshu Srivastava, Associate Director, Manager Research at Morningstar Investment Research India.

“While November saw lower mobilisation compared to October, redemption numbers were higher. This indicates that investors may have chosen to book profits with gold trading at elevated levels, especially with the impending marriage season driving demand for physical gold,” the report quoted Srivastava.

Gold Outlook

Gold, with its rising prices and growing industrial uses, is expected to remain on an upward trajectory, as per many experts. Gold’s appeal as a safe investment gives gold ETFs an edge as well. High inflation rates and global uncertainty are anticipated to keep gold investments tempting in the market.

Although, for gold ETFs, not all analysts are predicting continuous inflows in the segment considering the fact that equities have managed to offer approximately 16% returns while gold ETFs have given around 14%.

Even so, gold’s increasing use in technologies like artificial intelligence (AI) and semiconductors has kept the outlook somewhat positive. In the domestic market, gold prices noted a 30% increase from Diwali 2023 to the Diwali festival of 2024, and demand for gold is still sustained even with the recent dips seen in prices after the festive season buzz settled down.