Gold exchange-traded funds (ETFs) are one of the most sought-after options for gold investment. Unlike physical gold, they are easy on pockets and secure in terms of storage.
Gold ETFs are units that represent physical gold in a paper or dematerialized form. Investors can trade in Gold ETFs just like stocks, through a demat account and a broker. One gold ETF unit is usually backed by 1 gram of physical gold and upon selling, investors get cash and not physical gold.
India's gold ETFs saw net inflow of Rs 1,100 crore in April, the highest since February 2020. This came after a rise in gold prices owing to the Ukraine-Russia war that led to investors shifting to safer investment options. Gold prices hit a high of Rs 53,367 per 10 grams last month amid the crisis.
Not just in India, the demand for gold ETFs went up globally amid the geopolitical tensions. World Gold Council data showed that globally gold ETFs witnessed highest quarterly inflows in the first quarter of CY2022 since Q3CY20.
So should investors continue to invest in gold ETFs?
The recent fall in gold prices may have acted as a dampener for those invested in ETFs for a short term keeping liquidity in focus but experts believe this investment option will continue to be one of the best as long as volatility remains in markets.
"Gold ETFs are a good option right now, and will continue to do well as long as there's volatility in the other asset classes. Plus there's no hassle of GST or reselling like with physical gold," Adhil Shetty, CEO, BankBazaar, told CNBCTV18.com.
Anuj Gupta, vice-president, research, commodity and currency, IIFL Securities, told Moneycontrol that he expects gold to touch as high as Rs 56,000 to 57,000 in a few years. “Initially, when the interest rates are hiked by central banks, gold may see some downside as low as Rs 48,000 per 10 g. But over a couple of years, gold should go as high as Rs 56,000 to Rs 57,000 per 10 g," he said.
The report also quoted Ravindra Rao, vice-president and head, commodity research, Kotak Securities as saying, "With increasing challenges to the global economy and increased volatility in equity markets, we expect to see good investor interest in gold and this may keep prices supported."
Gold prices declined to near 3-month lows in India ahead of monthly US inflation data on Wednesday. On Thursday, gold traded at Rs 51,000 per 10 grams.
First Published: May 12, 2022 4:10 PM IST
