Inflows to gold ETFs slowed to Rs.1,414 cr in FY13 from a five-year high of Rs.3,646 cr in the previous fiscal.
Net inflows to gold exchange-traded funds (ETFs) have nearly halved in fiscal 2013 as gold is losing its lustre as a safe haven.
Inflows to gold ETFs slowed to Rs.1,414 crore in the year ended March from a five-year high of Rs.3,646 crore in the preceding fiscal.
March was the second consecutive month of outflows, with Rs.87 crore being withdrawn from gold-based ETFs—the highest in nine months. It is not surprising that Indian investors are shying away from the yellow metal because it has corrected nearly 11% after scaling an all-time high in November last year in rupee terms.
Some analysts are even calling it the end of the golden era, and foreign brokerages such as Goldman Sachs have reduced their forecast for gold for the next one year to $1,390 per oz from the current level of $1,533. Fund managers say investors may have moved out of gold into riskier assets as tail risks in the global economy have reduced and growth has resumed.
Bhargava Vaidya, bullion expert and director of B.N. Vaidya and Associates, however, said, “People may prefer keeping gold in physical against electronic form because RBI (Reserve Bank of India) may come out with some gold deposit schemes. They may want to earn some interest on gold from deposit schemes rather than losing out on the management fees to the fund house as gold prices are falling.”
Most analysts expect gold to remain under pressure in the medium term if global growth improves and the dollar strengthens, reducing the safe haven demand. It isn’t only in India that money is flowing out of gold ETFs. Goldman Sachs has noted that outflows continued and gold prices went down despite the recent resurgence of risk in the euro zone as a result of the Cyprus crisis.
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