The Assets under Management (AUM) for Gold Exchange Traded Funds (Gold ETFs) has jumped nearly three-fold to Rs 4,400 crore during the last fiscal, which shows that appetite for buying virtual gold is slowly gaining popularity among domestic investors.
The assets under management (AUM) for Gold ETFs has grown to Rs 4,400 crore as on March 31, 2011, as compared to Rs 1,590 crore on the same day last year, according to data compiled by the Association of Mutual Funds in India (AMFI).
Investors in India, the world’s largest consumer of gold, have traditionally been buying physical gold. With steep rise in prices, some of them are shifting towards buying “virtual gold” i.e. Gold ETFs.
Gold ETFs are units that represent physical gold in paper or demateralised form. These units are traded on the exchanges National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). It offer investors a means of participating in the gold bullion market without taking physical delivery.
Gold ETFs, which was launched in India in 2007, can be bought in units as low as one gram or even half-a-gram.
Currently, there are as many as 10 asset management company (AMC) offering Gold ETFs in the market.
On NSE, the total traded value has jumped to over Rs 4,000 crore in the last fiscal from Rs 1,842 crore in 2009-10 financial year, sources said.
The soaring gold price in the physical market has helped in growing investors interest for Gold ETFs.
Gold, which is considered a safe haven and hedge against inflation, has been giving an annualised return of over 20 per cent in last four years. The prices of yellow metal that stood at Rs 9,357 in April 2007, has more than doubled to Rs 20,733 in April 2011.
Gold prices touched an all time high of Rs 21,710 per 10 grams on April 15, last week. Despite high prices, investors are buying gold ETFs even on auspicious occasions like Akshay Tritiya.
For instance, NSE recorded a volumes worth Rs 172 crore on Akshay Tritiya last year and expects that the volume would be higher this year on May 6, sources said.
Delhi-based SMC Global analyst said, “Gold ETFs are doing well despite high prices. Demand is high from small players. I believe there will be good response on this Akshay Tritiya.”
Gold ETFs is also catching the fancy of investors because of the tax advantage it offers over the option of buying physical gold. There is no wealth tax and VAT (Value-added tax) if an investor buys units of Gold ETFs.