Gold ETFs attract `446 crore in Sept; inflow may continue on festive season demand

New Delhi: Gold ETFs attracted Rs 446 crore in September and inflow may continue in coming months due to strong demand on the back of festival season in the country.

The was sharply higher than the net inflow of Rs 24 crore recorded in the previous month. In July, the category saw a net withdrawal of Rs 61.5 crore, data with the Association of Mutual Funds in India (Amfi) showed.

With this, gold exchange traded fund (ETF) category has received a net inflow of Rs 3,515 crore so far. The segment witnessed just one month of net outflows, which was in July. The latest inflow helped in pushing the number of folios in the category by over 14 per cent to 24.6 lakh in September from 21.46 lakh in the preceding month. So far this year, the folio numbers have surged by 56 per cent.

Market experts attributed the inflow in September to correction in the price of the yellow metal and onset of the festival season in the country.

"Gold ETFs saw a prominent inflow for the past month. In the thick of a volatile market, resorting to a safe instrument can be one of the reasons for this move, with rising gold prices being the other reason drawing attention to the instrument," Priti Rathi Gupta, Founder of LXME, said.

Arshad Fahoum, Chief Product Officer, Market Pulse, said that the ongoing rally in global equities, coupled with the fierce rally in Indian equities in 2021, could be making investors wary of further rise, which seem to have supported the signs of gold prices bottoming out.

"If we look back at the period from July to mid-September, Indian equities rallied strongly; which could have meant investors opting for equity-based and debt funds, which in turn could be a reason for gold ETFs witnessing net outflows in July, mildly positive inflows in August and the huge inflows in September," he said.

Another interesting aspect is the outflows in gold ETFs experienced by the US, UK and Canada in September 2021, while Indian gold ETFs saw a significant inflow in the month under review.

This could also be an indication that the onset of the festival season in India may have assisted the rising gold ETF inflows in September 2021, he added.