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Tania Kishore Jaleel

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Mumbai, July 4

With inflation on the rise, investors seem to have found a golden opportunity in Exchange Traded Funds (ETF).

Gold ETFs gained 18.75 per cent, even as the Sensex and Nifty fell 36 per cent in the last six months.

There is a lot of uncertainty among other asset classes like equity and real estate, which is why investors are turning to safer avenues such as gold and gold ETFs, said Mr Devendra Nevgi, Chief Executive of Quantum Asset Management Company (AMC). Gold ETFs are also a good hedge against rising inflation and the depreciating dollar, he said and added that it was becoming popular among young investors, who were keen on investing in gold ETFs.

Share prices of the five listed gold ETFs have been gaining in strength since the beginning of the year. Except for Kotak Gold ETF, which gained 22 per cent to Rs 1,300 on Friday, all the four ETFs rose 23 per cent in last six months.

Benchmark’s gold ETF closed at Rs 1,303, UTI’s Rs 1,298 and Reliance’s Rs 1,300. Quantum ETF, which was launched in February, was up 6.7 per cent to Rs 651.86.

Gold prices in the spot market have shot up 21 per cent in 2008, and touched a high of Rs 13,135 on July 3.

“Gold ETFs are benchmarked against spot gold price, which are closely followed by the ETFs. That is why we are seeing an increase in the prices of the listed gold ETFs,” explained Mr Nevgi.

The physical gold held by the five listed ETFs added up to 4.76 tonnes up from 4.57 tonnes in the month of May. This is the highest ETFs have held since the first gold ETF was launched in India in February 2007.

As on June 30, Benchmark’s Gold ETF held 1.6 tonnes, UTI Gold ETF held 1.33 tonnes, Reliance Gold ETF held 1.37 tonnes, Kotak Gold ETF held 0.324 tonnes and Quantum Gold ETF held 0.041 tonnes.

The Gold ETFs are slowly becoming popular among the investors these days, add fund managers.

“Gold ETFs are slowly and gradually becoming popular and this trend will continue. Investors are seeing gold ETFs as more of a strategic investment rather than a tactical one. The investors see these ETFs as a good diversifier of portfolios,” said Mr Rajan Mehta, Executive Director of Benchmark Asset Management Company.

More Stories on : Gold & Silver | Mutual Funds

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