With equity markets running on a positive streak and turning expensive, investors have latched onto gold as a safe investment option. As a result, gold exchange-traded funds (ETFs) witnessed staggering net inflows of over Rs 2,400 crore in the three months ended September.
In July-September 2019, investors had infused Rs 172 crore in this asset class, data available with the Association of Mutual Funds in India (Amfi) shows.
The category has been among the better-performing ones so far this year and received a net inflow of Rs 5,957 crore. As per the data, a net sum of Rs 2,426 crore was pumped into gold-linked ETFs in three months ended September 30, 2020.
“Gold investment picked up due to higher economic uncertainty resulting from COVID-19,” said Harsh Jain, co-founder of Groww.
He added Investors expected to see very volatile markets world over, and in such times, investment in very safe assets like gold always shoots up. Even though now, the markets have mostly recovered and reached the pre-pandemic levels, uncertainty remains high going forward.
“We have seen a re-emergence of higher COVID-19 cases in many parts of Europe and USA. Many countries are imposing lockdowns in a staged manner again. This is leading to a higher economic uncertainty again. In such conditions, higher investment in gold assets is expected,” Jain said.
Gopal Kavalireddi, head of research at FYERS, said the US presidential elections outcome will have a bearing on the performance of equities over the next couple of months. This could prompt investors to reverse their choice and hedge their investments with gold ETFs.
“With the COVID-19 cases rebounding globally; continued liquidity and lower interest rates from central banks globally; and markets nearing the pre-COVID-19 levels, investors will continue to invest surplus liquidity in safer assets like gold,” he added.
He, further, said investors looking to invest in gold can choose between gold ETF, gold mutual funds, sovereign gold bonds, and physical gold.
The inflows led assets under management (AUM) of gold funds surging to Rs 13,590 crore at the end of September 2020, from Rs 5,613 crore at the end of September 2019.