Inflows in gold exchange traded funds increased sharply to ₹657 crore in January against ₹88 crore in December as the uncertainty over the US Fed cutting interest lingers apart from global economic uncertainty. The inflows was also aided by the launch of Tata Gold Exchange Traded Fund which garnered about ₹6 crore last month.

The asset under management in gold ETF increased 2 per cent to ₹27,778 crore against ₹27,326 crore in December, according to the Association of Mutual Funds in India data.

Gold prices in global markets have scaled new highs after going past the $2,100 per ounce-mark in early last December but has gradually come down ever since opening an opportunity for investors to consider gold ETF as an investment option. It has been trading range-bound at about $2,023 an ounce currently.

Melvyn Santarita, Analyst, Morningstar Investment Research India said with the ongoing geopolitical tensions and US inflation still hovering higher than the desired number, the appeal of gold as a safe haven and hedge against inflation is expected to continue.

Risk-on approach

In India, he added gold has done fairly well over the last year but dwarfs in comparison to the bull run in the equity markets. “Given this, flows in Gold ETF category has been somewhat patchy with few investors choosing to opt for a risk-on approach in anticipation of a reversal in the US rate cycle going ahead,” he said.

Inflows in gold ETF softened to ₹1,263 crore in December quarter against ₹1,659 crore in September quarter after a nominal inflow of ₹298 crore in June quarter.

The asset under management has jumped to ₹22,339 crore in June quarter to ₹27,326 crore in December after a sharp run-up in prices.

Ajay Kumar, Director, Kedia Commodities said gold prices are expected to remain volatile through this year and it may fall to $1,950 an ounce on the back of strengthening dollar against other global currencies.

The US Fed rate cut is expected after May as the US will go for election in November and the yellow metal should rally to $2,240 an ounce in the second half of this year, he added.