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Gold April 23, 2014 07:30:13 AM

Gold ETFs seen losing its sheen among Indian retail investors

Paul Ploumis
ScrapMonster Author
The retail investor interest on gold backed Exchange Traded Funds (ETFs) has declined considerably since May 2013

Gold ETFs seen losing its sheen among Indian retail investors

MUMBAI (Scrap Monster): The retail investor interest on gold backed Exchange Traded Funds (ETFs) has declined considerably since May 2013, according to data released by the Association of Mutual Funds of India. The holdings in gold-ETFs have dropped by 18% since then. These products still continue to witness continuous net outflows, indicated the Association data.

Gold ETFs was once the most popular investment tool. Investors flocked to the schemes in 2012-’13 fiscal which attracted net inflows of Rs 1,414 crores. However, in 2013-’14, the gold schemes witnessed a net outflow of Rs 2,293 crores. Large fund houses have also stopped pushing gold ETF products. The assets under management of gold ETFs dropped by nearly Rs 2,000 crores during FY’13.

According to Kotak Mutual Fund, gold demand is likely to decline as global economy recovers. Fresh buying has almost dried up. On the other hand gold-ETF redemptions have gone higher in the country. FY ’13 witnessed huge erosion of assets in gold-ETFs. Almost a fifth of the gold ETF accounts were closed during the year. The huge unwinding is likely to accentuate in the coming months as well, they said.

The poor outlook on gold has forced many investors to close their folios in gold ETFs. The gap between international and domestic gold prices due to higher duty structure prevailing in the country also has made investors wary of investing in such funds.

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