Profit booking drives 47% drop in February gold ETF inflows despite all time high prices

Gold prices have reached new document highs, however Gold ETFs skilled a notable slowdown in February, with month-to-month inflows dropping by 47.22% to Rs 1,979 crore, in comparison with Rs 3,751 crore in January.
Despite this decline, the inflows in Gold ETFs have nonetheless seen a 99% year-on-year enhance, from Rs 997 crore in February 2024. This shift indicators a posh market situation, the place profit-taking after gold’s value surge and enticing alternatives in the fairness markets are reshaping investor behaviour, in accordance with an ET report.
“The decline in inflows can be attributed to profit booking, as gold surged to an all-time high last month, prompting investors to lock in gains,” defined Nehal Meshram, Senior Analyst – Manager Research at Morningstar Investment Research India.
“Additionally, equity market corrections presented attractive buying opportunities, leading some investors to shift focus from gold ETFs to equities.” he added.
Gold ETFs nonetheless managed to ship a mean return of three.34% in February, with UTI Gold ETF rising as the highest performer, returning 3.70%. Other ETFs comparable to Kotak Gold ETF, Zerodha Gold ETF, and DSP Gold ETF supplied 3.54% returns. Invesco India Gold ETF and Tata Gold ETF returned 3.08% and a couple of.48%, respectively.
Nehal additionally identified that the expectation of potential rate of interest cuts by international central banks has dampened the urgency for safe-haven investments like gold. Despite the decline in inflows, gold continues to be a necessary portfolio diversifier, particularly with international financial situations remaining unsure. Gold’s function as a hedge in opposition to market instability is predicted to take care of its attraction in the approaching months.
The belongings below administration (AUM) for Gold ETFs grew by 7%, reaching Rs 55,677 crore in February, in comparison with Rs 51,839 crore in January. On a yearly foundation, AUM surged almost 95%, up from Rs 28,529 crore in February 2024.
Ajay Garg, CEO of SMC Global Securities, added, “The gold ETFs’ net inflows have decreased, but their AAUM grew by 15% to Rs 55,001.75 crore. This rise is due to a sharp rally in gold prices, which can also fuel the investor’s interest in gold ETFs in the near future.”
According to the most recent knowledge from the Association of Mutual Funds in India (AMFI), just one new Gold ETF scheme was launched in February, with Union Gold ETF gathering Rs 11 crore.
(Disclaimer: The opinions, analyses and suggestions expressed herein are these of brokerage and don’t mirror the views of The Times of India. Always seek the advice of with a professional funding advisor or monetary planner earlier than making any funding selections.)