Gold ETF assets near Rs 12,000 crore mark

Tags: Commodities

Absence of theft risk, zero storage cost major attractions compared with physical gold buying

Rising gold prices and continuing investor demand has pushed the size of assets held through gold ETFs (exchange-traded funds) to an all-time high of Rs 11,918 crore in the country.

The surge in asset size of gold funds continues even as the government has taken steps to direct the flow of household savings into equity, mutual funds and other financial instruments, rather than to idle assets like gold.

According to data compiled by the mutual fund industry body Association of Mutual Funds in India (Amfi), the assets under management (AUM) of gold ETFs stood at Rs 11,918 crore at the end of November 30.

There are as many as around 25 different gold ETF schemes offered by 14 different fund houses at present. These products, which track gold prices, provide an opportunity to accumulate it over time since they can be bought in small quantities.

The total AUM of gold ETFs had crossed Rs 11,000 crore mark in September, while it had surpassed the psychological mark of Rs 10,000 crore in April.

The total investor wealth in gold ETFs stood at over Rs 5,000 crore level in May 2011, the historic data showed.

In the past three months (September-November), inflows worth nearly Rs 1,000 crore have come into gold ETFs. In 2011-12, over Rs 3,600 crore was pumped, while Rs 2,250 crore inflows came in 2010-11.

Industry experts say that benefits such as no risk of theft and zero storage cost compared with physical gold, have sustained this interest among investors since the first gold ETF was launched in February, 2007.

Gold prices have also more than tripled from Rs 10,000 levels to Rs 31,000 in the last five years. These factors have contributed to rush for gold ETFs and the category has seen AUM soar from Rs 138 crore in April, 2007 to Rs 11,918 crore in November, 2012 – over 85 times in five years.

In comparison, investor wealth in debt mutual funds has grown from Rs 33,000 crore to Rs 387,000 crore — about 12 times. Equity mutual fund assets have grown 30 times from Rs 5,400 crore to Rs 165,000 crore in the same 65 months.

A number of new policy measures have already been introduced this year by the government in an attempt to curb demand for bullion imports.

The measures appear to be bearing some fruit as gold imports have declined to 398 tonnes during April-October of 2012-13 from 589 tonnes during the same period in the previous financial year. In value terms, this is a decline from Rs 1.40 lakh crore to Rs 1.15 lakh crore. However, India remains a critical force in the global physical gold market.

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