One asset class that has gained traction amid this development is gold exchangetraded funds (ETFs). After an outflow of Rs. 395.69 crore in April, gold ETFs have seen consistent inflows: Rs. 827.43 crore in May, Rs. 726.16 crore in June, and Rs. 1,337.35 crore in July (according to Association of Mutual Funds in India) data. The July inflow is the highest since February 2020.
Factors Driving Inflows
One reason for the increased investment in gold ETFs is the absence of sovereign gold bond (SGBs) issuances in the current financial year. According to reports, the government may reduce the issuance of SGBs to Rs. 18,500 crores in FY 2024-25, down from Rs. 29,638 crores mentioned in the interim budget of 2024. Due to the lack of primary issuances, SGBs are trading at a significant premium in the secondary markets, and hence investors are steering clear of them.
In the July 2023 budget, the government reduced the customs duty on gold from 15 per cent to 6 per cent. This reduction lowered gold prices in the market, prompting many investors to purchase gold at cheaper rates.
Sound Prospects Over Three Years
Gold has delivered a high return of 18.6 per cent over the past year. Despite this, experts believe that investors can still enter gold ETFs if they have at least a three-year horizon. One reason is that the interest rate cycle is about to turn. Inflation has significantly decreased from earlier levels. If growth concerns arise, the United States Federal Reserve (US Fed) could cut interest rates as early as September. When bond interest rates fall, the opportunity cost of holding a non-interest-bearing asset like gold decreases, making it more attractive.
An interest rate cut in the US would also weaken the dollar. Since gold is priced in the international market in dollars, a weaker dollar makes gold cheaper for investors from other countries, increasing demand and boosting price.
Esta historia es de la edición September 2024 de Investors India.
Comience su prueba gratuita de Magzter GOLD de 7 días para acceder a miles de historias premium seleccionadas y a más de 9,000 revistas y periódicos.
Ya eres suscriptor ? Conectar
Esta historia es de la edición September 2024 de Investors India.
Comience su prueba gratuita de Magzter GOLD de 7 días para acceder a miles de historias premium seleccionadas y a más de 9,000 revistas y periódicos.
Ya eres suscriptor? Conectar
Indians are Developing Weak Bones
In India, 1 out of 8 males and 1 out of 3 females suffer from osteoporosis, making India one of the largest affected countries in the world.
"The strategy behind the Tata India Innovation Fund centers on identifying companies that are driving transformative or incremental changes through innovation"
Yes, we certainly believe innovation is a powerful theme with immense potential for the coming years, and we are excited to bring it to our investors.
What is Hybrid Mutual Fund?
Hybrid Mutual Fund is a combination of more than one type of fund. While they invest in shares of companies listed on the exchange, like equity funds.
Should you invest in dynamic bond funds?
Dynamic bond funds have delivered a category average return of 8.68 per cent over the past year, making them the fourth best-performing category, following long-duration funds, constant maturity gilt funds, and gilt funds. With interest rate cuts yet to begin, these funds remain a viable option for investors seeking to benefit from possible rate reductions.
The Multicap Solution to India's MultiDimensional Growth
India is entering a transformative era of economic growth, backed by a unique combination of demographic strength, infrastructure development, and rising global prominence.
The Long-Term Benefit of Investing in Children's Future
A child is the most treasured part of any parent's life, and naturally, we want to give them the best of what the world has to offer. This often means not only ensuring we can meet their needs but also nurturing them to pursue their unique aspirations. Each child has their own dreams and challenges, making the early years critical as they lay the foundation for a healthy and fulfilling future.
ASK THE EXPERT
Ques. One of my friends told me that your company provides detailed Retirement plans. I want to know what is the procedure to get my Retirement plan. I will be retiring in March 2025. R.P Gupta, Noida
How to Naturally Reverse Fatty Liver Disease
The liver, located on the upper-right side of the abdomen, is the body’s largest internal organ and plays a critical role in detoxifying the blood and processing nutrients.
Banking sector which has underperformed in the last two years, now offers a favorable risk-reward profile
Do you think the market is overpriced? Is yes, should investors refrain from investing in index schemes at the current valuation?
India will continue to enjoy benefits of a close US relationship and trade will continue to grow
Q1. The US elections are said to be one of the closest till date, what impact will the election of a Republican / Democratic party have on the US economy and how is that going to affect India in the short as well as the long term?
