Gold ETFs see strong demand amid global market volatility
Wed Feb 12 2025
In recent times as equity markets have turned volatile amid escalating trade tensions that threaten to derail global trade, gold has been shining bright as investors are flocking to the precious metal as a safe-haven asset.
Gold Exchange Traded Funds (ETF) in India saw net inflows of ₹3,751.42 crore in January 2025, the highest ever monthly net inflows, data from the Association of Mutual Funds of India showed. The inflows into Gold ETFs in January are significantly higher than the ₹640 crore in net inflows seen in December 2024.
The trend mirrors the rise in inflows into Gold ETFs globally amid the global uncertainties. According to the World Gold Council (WGC), global gold investment demand surged 25 per cent in 2024 to 1,180 tonnes, a four-year high, driven by a revival in gold ETF demand. Strong inflows continued in January too, with gold funds adding $3 billion worth of gold during the month taking the total assets under management of global gold ETFs to $294 billion, according to WGC. European funds saw their largest monthly inflows since March 2022, adding $3.4 billion in January, it said.
In India, driven by the strong inflows in January, net assets under management of gold ETFs touched ₹51,839 crore, AMFI data showed.
"The ongoing volatility in domestic and global equity markets heightened investors' risk aversion, leading many to seek refuge in gold ETFs, which are traditionally considered safe-haven assets. This shift was driven by concerns over economic uncertainties and geopolitical tensions," said Himanshu Srivastava, associate director-manager research, Morningstar Investment Research India.
Investors have increasingly turned to gold ETFs as a means of diversifying their portfolios and hedging against inflation, given the transparency, ease of investing and liquidity they offer, he added.
Amid strong demand, global gold prices had climbed to a record high of $2,942.70 per ounce on Tuesday after US President Donald Trump announced tariffs on imports of steel and aluminium, raising fears of the trade war spreading, with other countries expected to announce similar measures.
In India too, gold prices have surged. On Wednesday, gold prices were trading around ₹85,000 per ten gram on the MCX.
Source: https://www.theweek.in/