Gold ETFs log Rs 457 crore outflow in July

Source: The post is based on the article “Gold ETFs log Rs 457 crore outflow in July” published in Indian Express on 12th August 2022.

What is the News?

Gold Exchange Traded Funds(ETFs) witnessed a net outflow of Rs 457 crore in July as investors parked their money in other asset classes as part of their portfolio rebalancing strategy.

What are Gold Exchange Traded Funds(ETFs)?

Gold ETFs aim to track the domestic physical gold price. They are passive investment instruments that are based on gold prices and invest in gold bullion.

In short, Gold ETFs are units representing physical gold which may be in paper or dematerialised form. One gold ETF unit is equal to 1 gram of gold and is backed by physical gold of very high purity.

Hence, they basically combine the flexibility of stock investment and the simplicity of gold investments.

Benefits of Gold ETFs: 1) There is complete transparency on the holdings of an ETF and 2) There is no fear of theft as ETFs are safe and secure as units held in the Demat Account of the holder.

What are the reasons for Gold ETF’s outflow?

The significant Gold ETFs outflows seem to have risen out of investors’ expectations of a rising interest rate cycle leading to a fall in gold prices.

Also, a falling rupee is another factor that has likely impacted the demand and supply dynamics of gold. This trend has been witnessed globally too, with gold ETF’s posting significant outflows on the back of lower gold prices.