Dhanteras 2024: Planning to buy gold ETFs? Check the average one-year returns, gold outlook, and expert take

Dhanteras is considered an auspicious day to purchase gold, utensils, and many other household things. 

Gold ETFs, which have witnessed an over seven-fold surge in AUM (assets under management) in the last five years from ₹5613.22 crore in September 2019 to ₹39,823.50 crore in September 2024, seem to be the flavour of the season ahead of the Dhanteras.

Inflows into Gold ETFs have surged by nearly 88% since the beginning of this calendar year at ₹1,232.99 crore in September 2024, up from ₹657.46 crore in January, as per a report by ICRA Analytics, which was released on October 17. 

With the escalating geopolitical tensions boosting the “safe-haven” appeal of the bullion, investors prefer to park their funds in gold ETFs as compared to investing in physical gold as there is no hassle of storing it. Besides, there are concerns about purity and theft while investing in physical gold, which is not the case with Gold ETFs, the report added. 

Gold ETFs 1-year return

There are as many as 17 Gold ETF schemes in the market, and the average one-year returns were in the range of 29.12%, while 3-year and 5-year returns were 16.93% and 13.59%, respectively. LIC MF Gold ETF gave the maximum returns on a 1-year, 3-year, and 5-year basis at 29.97%, 17.47%, and 13.87%, respectively. This is marginally lower in contrast to an average return of 30.13%, 18.03%, and 14.88% over a 1-year, 3-year, and 5-year period on physical gold. 

Expert Take: Who should invest in gold ETFs?

“Investors with a short- to medium-term investment horizon may consider investment through Gold ETFs. A buy-on-dips strategy in this case may help investors to capitalise on a temporary correction in prices. Also, given the current market dynamics where equities are showing mixed trends, a modest allocation to gold may serve as a hedge against inflation and market volatility, which may help balance risks in an optimum manner,” said Ashwini Kumar, Senior Vice President and Head Market Data, ICRA Analytics.

Gold Price Outlook

Goldman Sachs, in its September 2024 report, said that gold has the highest potential for a near-term price hike due to its status as a preferred hedge against risk, while weak demand from China has led to a "more selective, less constructive" view of other commodities. "Imminent Fed rate cuts are poised to bring Western capital back into the gold market, a component largely absent of the sharp gold rally observed in the last two years," Goldman analysts said in a note titled 'Go for Gold'.