Gold ETFs Attract Highest Inflow in 16 Months in August

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Gold exchange-traded funds (ETFs) attracted Rs 1,028 crore in August 2023, making it the highest inflow in 16 months, according to data from the Association of Mutual Funds in India (Amfi). This is despite continued hikes in interest rates in the US, which have led to a slowing down in growth rate there. The year-to-date inflow in the category has reached more than Rs 1,400 crore.

Factors Driving Gold ETF Inflows

There are a few factors driving the inflows into gold ETFs:

  • Safe haven asset: Gold is seen as a safe haven asset in times of economic uncertainty. The current macroeconomic environment, with high inflation and rising interest rates, is driving investors to seek refuge in gold.
  • Hedge against inflation: Gold is also seen as a hedge against inflation. As the cost of living rises, the value of gold tends to increase as well.
  • Diversification: Gold can help to diversify an investment portfolio. It has a low correlation with other asset classes such as stocks and bonds.
  • Attractive valuations: Gold prices have come off from their all-time high levels in recent months, making them more attractive to investors.

Outlook for Gold ETFs

The outlook for gold ETFs is positive. The factors driving inflows into gold ETFs are likely to remain in place in the near term. Moreover, the continued hike in interest rates in the US could lead to a recession, which would further boost the demand for gold as a safe haven asset.

Investors who are looking to add a safe haven asset to their portfolio and/or hedge against inflation may consider investing in gold ETFs. However, it is important to note that gold is a volatile asset and its prices can fluctuate significantly in the short term. Investors should carefully consider their risk tolerance and investment objectives before investing in gold ETFs.


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