NEW DELHI: Gold exchange traded funds (ETFs) remained in favour in 2021 with the segment attracting Rs 4,814 crore primarily due to firming of inflation and elevated market valuations.
Although, the inflow was lower compared to Rs 6,657 crore seen in 2020, data with Association of Mutual Funds in India (Amfi) showed.
The global recovery and improved investor sentiment resulted in gold ETF flows sobering down in 2021 compared to the pandemic year.
Quantum Mutual Fund MD and CEO Jimmy Patel said the category may see continued interest in 2022 amid sticky inflation and the Federal Reserve attempting to catch up to it, possibly disrupting growth and markets.
“That said, tightening of monetary policy by the Fed will be supportive of the dollar and US yields, which will be a headwind for gold. The conflicting forces will keep gold in a consolidation mode for some time making it conducive for investors to accumulate gold,” he added.
Flows into gold ETFs in 2020 were the result of risk aversion due to the Covid-19 pandemic as well as the coordinated easing of monetary policies and softening of global interest rates which made gold attractive.
“In 2021, gold remained in favour mainly due to the firming of inflation and elevated market valuations that pushed investors to hold gold to preserve their capital against a possible market downturn,” Patel said.
Himanshu Srivastava, Associate Director Manager Research, Morningstar India, said that gold ETFs continued to attract investor attention throughout the year and that too when equity markets picked up pace.
The segment witnessed just one month of net outflow, which was in July 2021 of around Rs 61.5 crore. This points towards investors liking for yellow metal as part of their investment portfolio.