Indian Gold Exchange Traded Funds (ETFs) have continued to draw significant investor interest, recording net inflows of ₹1,179 crore in the first two weeks of August. This sustained demand comes even as gold prices experienced a notable rebound, according to the latest data from the World Gold Council.
The August figures build on a strong performance in July, which saw Gold ETFs attract ₹1,560 crore in net inflows. The resilience in investments highlights a consistent appetite for gold exposure through financial products among Indian investors.
Steady Growth in Holdings and AUM
Despite a moderation in the pace of inflows compared to earlier periods, the overall trend remains positive. Gold ETF holdings increased by 1 tonne in July, reaching a total of 120 tonnes. Concurrently, the Assets Under Management (AUM) for these ETFs grew by 2% month-on-month, climbing to ₹1.73 lakh crore.
The investor base for gold ETFs is also expanding, with an additional 57,000 new folios added in July. This brings the total number of gold ETF accounts in India to approximately 1.25 crore, indicating a broadening participation in this investment avenue.
Demand Drivers Amid Price Fluctuations
The continued inflows are particularly notable given the recent movements in gold prices. After a sharp correction in June, international gold prices surged by 9% in the first two weeks of August, reaching US$4,391 per ounce. Domestic gold prices also saw a nearly 7% gain, touching ₹1,51,744 per 10 grams as of August 14.
Several factors are contributing to this sustained demand for gold and Gold ETF investments:
- Strategic Exposure: Lower prices in previous periods attracted investors looking for long-term strategic exposure to the precious metal.
- Market Rebound: The subsequent price rebound has revived interest, with investors keen to capitalize on upward momentum.
- Global Economic Factors: A weaker US dollar and expectations of a more dovish stance from the Federal Reserve are making gold more attractive.
- Central Bank Buying: Continued purchases by central banks globally provide a strong underlying support for gold prices.
- Safe-Haven Demand: Persistent geopolitical and economic uncertainties fuel gold's traditional role as a safe-haven asset.
- Festive Season: The upcoming festive and wedding season in India is anticipated to further boost both physical and investment demand for gold.
Physical Gold Market Also Strong
Beyond ETFs, the physical gold market is also showing strong signs of recovery. Jewellery demand has strengthened as consumers view recent price movements as opportune buying moments. Manufacturers report higher order flows, and jewellers are increasing inventory in anticipation of the festive season.
Gold imports rebounded sharply in July, with import value rising to US$4.16 billion from US$1.97 billion in June. Estimated import volumes increased significantly to 40-45 tonnes, up from 20 tonnes in June, signaling robust physical demand and inventory replenishment across the country.
The World Gold Council projects that improving demand conditions will support a stronger festive season for gold. While elevated prices may influence some jewellery purchases, overall investment demand, particularly through channels like Gold ETFs, is expected to remain supportive.