Investment in gold ETF up 6 times in 2023

Investment in Gold Exchange Traded Fund (ETF), a financial product related to gold investment, increased six times last year to Rs 2,920 crore as compared to the previous year. Investors are giving preference to this traditional investment product which is considered safe amidst high inflation rate, increase in interest rates to control it and global tension. According to data from mutual fund industry body Association of Mutual Funds in India (Amfi), the asset base and number of investor accounts under gold ETFs have also increased significantly.

Gold ETF is an exchange traded fund (ETF). It tracks the price of domestic physical gold. This is a fund based investment product, which is based on gold prices and under this, investment is made in gold. According to the data, investment of Rs 2,920 crore was made in Gold ETF in 2023. This is much more than the inflow of Rs 459 crore in 2022. Last year, in August alone, an investment of Rs 1,028 crore was made in this fund, which is the highest figure in 16 months.

There is an attraction towards gold as a safe investment. People are investing in it to protect themselves from the risks arising from inflation. Mainly due to rising inflation, increase in interest rates to control it and ongoing tensions at the global level, investors are preferring to invest in gold which is considered safe. Himanshu Srivastava, Associate Director, Morningstar Investment Research India, said that the attraction towards gold has increased due to high inflation and subsequent increase in interest rates. Apart from this, the increased global tension due to the war between Israel and Hamas has made it an attractive and safe investment option for investors.

Vishal Jain, CEO, Zerodha Fund House, said Indians have an age-old association with physical gold, while they have been slow to adopt investment products like gold ETFs. He said that with increasing use of digitalization over time and wide availability of products, investors are increasingly choosing the option of gold ETFs. Given the volatility we have seen, investing in gold is a good move.

With increased investment, assets under management under the Gold Fund increased by more than 27 percent to Rs 27,336 crore at the end of December 2023. A year ago it was at the level of Rs 21,455 crore. Last year, the number of folios (accounts) under Gold ETF increased to 49.11 lakh, which was 46.38 lakh in December, 2022.