High gold prices are not deterring India’s commodity investors to put more money into gold exchange traded funds (ETFs).
With gold prices escalating to new high almost every month, investors in India have started to show a totally new-found interest in these gold funds. Gold ETFs are new in India, but they have given an impressive more than 20 per cent returns in the last one year.
Gold fund managers in India say the ETFs collections are going up and investors are growing up by a 100 per cent year-on-year. “Gold ETFs are continuing to pick up in India. Gold collection ETFs rose 24.6 per cent to 5.931 tonnes from 4.761 tonnes a year ago,” Arvind Chari, fund manager, Quantum Mutual Fund that runs a gold ETF in India said.
He said gold ETFs are emerging as the fasting growing investment segment in India. “I am sure more ETFs are likely to come in other commodities like silver in India,” he pointed out.
Launched in 2007, Gold ETFs in India are managed by six fund houses including Benchmark Asset Management, UTI Mutual Fund, Kotak Mahindra Mutual Fund, Reliance Capital Asset Management, Quantum Mutual Fund and the State Bank of India.
Though Gold collections under the ETFs are growing in India year on year, they remain negligible when compared to India’s imports of around 700 tonnes annually.
ETFs track the performance of a particular index; their base price is basically equivalent to the value of the index. ETFs are not limited to gold. There are ETFs of almost all metals and most-traded agro-commodities. Eg: Gold, silver, copper, wheat, corn, cotton etc. At present, in India gold is the only commodity ETF.
The main problem for rapid growth of gold ETFs in India is said to the lack of awareness and complicated investment norms. Moreover, people still find charm in holding physical gold. The five gold ETF funds put together hold just above five tonnes of gold.
According to the World Gold Council, Indian households own about 15,000 tonnes of gold, comprising around 10 per cent of global stocks.