Gold exchange-traded funds log Rs 195 crore outflow in November 2022 on profit booking

Gold exchange-traded funds (ETFs) witnessed a net outflow of Rs 195 crore last month primarily due to profit booking amidst a rally in the markets. 

In comparison, the segment had attracted a net inflow of Rs 147 crore in October and Rs 330 crore in September. Prior to that, gold ETFs saw a net withdrawal of Rs 38 crore in August, data with the Association of Mutual Funds in India (Amfi) showed. 

"The latest outflow could be attributed to profit booking amidst the rally in the markets and gold demand in the households for the prevailing wedding season," Priti Rathi Gupta, Founder of LXME, said. 

While the fund inflow in October was mainly on account of festive season demand as investors might have chosen to buy physical gold. 

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Overall, the gold ETF category has received a net inflow of Rs 1,121 crore so far this year, the data showed. 

Despite the outflow, the assets under management (AUM) of the instrument surged to Rs 20,833 crore at the end of November from Rs 19,882 crore at October-end. 

Also, the category saw an increase in the number of folios by over 11,800 to 46.8 lakh during the period under review. This suggests that investors might continue to invest in gold ETFs as a means to diversify their portfolio and hold the financial instruments a hedge against market risks. 

Gold ETF, which aims to track the domestic physical gold price are passive investment instruments that are based on gold prices and invest in gold bullion. 

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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. They combine the flexibility of stock investment and the simplicity of gold investments.