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Gold ETF AUM plunges by 9.6% in August

With gold prices volatile due to geopolitical issues and the Covid pandemic, assets under management (AUM) for gold exchange traded funds (ETFs) plunged from Rs 310.63 crore in July to Rs 280.81 crore in August, by 9.6%, according to data from the Association of Mutual Funds in India (AMFI).


Financial analysts say that as gold prices began declining, fresh investments in gold ETFs stopped.


“While fresh investments in gold ETFs stopped, several investors withdrew for profit-booking as well. Moreover, as the last tranche of sovereign gold bonds (SGBs) opened in August, many who were in for a longterm investment moved from ETFs to SGBs anticipating better returns,” said Mumukshu Desai, director of a city-based financial advisory firm. After consistently growing for 10 months, gold ETFs showed a sharp plunge.


Analysts also said that the net asset value (NAV) of existing investments also went down. “With a correction in gold prices, net asset value of existing investments has gone down. August was a great month for the stock markets and thus investors shifted to equity linked investments anticipating better returns,” said Jayesh Vithalani, a financial analyst.


After touching a peak of Rs 55,000 per 10g in August, gold prices plunged to as low as Rs 51,800 per 10g. “Gold prices corrected in the international market, after the stimulus package was announced in the US and there was news about the discovery of a vaccine for Covid-19, easing economic uncertainties. Moreover, the rupee also strengthened against the dollar as a result of which price of gold in the Indian market plunged further,” said Hemant Choksi, an Ahmedabad based bullion trader.


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