Investors diversify into gold ETFs amid sustained weakness in domestic equity markets
Sat Feb 22 2025
The World Gold Council expects strong investor interest in gold to persist after unprecedented inflows in gold ETFs (exchange-traded funds) in January.
“The cumulative assets under management of gold ETFs grew to ₹51.8 billion (around $6 billion), a 15 per cent month-on-month increase and 4.6 tonnes were added to the overall holdings, taking the collective holdings to 62.4 tonnes,” WGC has said in its India report.
The council suggested the inflows in January can be attributed to investors redirecting free cash flow towards gold ETFs for diversification amid ongoing global and domestic economic and policy uncertainty.
“The sustained weakness in the domestic equity markets has also been driving flows into gold ETFs, with investors pulling back from equities in favour of the safe-haven appeal of gold.
Data from AMFI shows that net inflows into gold ETF in January 2025 were ₹3,751.42 crore compared with ₹640.16 crore in December 2024. With the government not deciding to issue any sovereign gold bonds as part of its market borrowing programme, inflows are expected to persist in the gold ETFs amid market uncertainty.
The council in its report also said that jewellery demand remains subdued amid high gold prices. “Rather than making fresh purchases, many buyers are opting to exchange old gold for new jewellery. Additionally, as gold prices surged past previous thresholds, many consumers are also taking the opportunity to sell old gold and lock in profits,” the report said, adding that the slowdown in jewellery demand has left retailers reluctant to restock.
The RBI has also started accumulating gold in January.
“The RBI resumed its gold purchases in January, after pausing in December following 11 consecutive months of buying. The central bank added 2.8 tonnes of gold to its gold holding during the month, taking its total gold reserves to a new high of 879 tonnes,” the report said adding the renewed buying suggests the RBI is likely to continue with gold accumulation following a significant purchase of 72.6 tonnes in 2024.
Source: https://www.telegraphindia.com/