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Home >Money >Personal Finance >Gold ETF saw record net inflows of 6,918 crore in FY21

NEW DELHI: In the just concluded financial year, gold exchange traded funds (ETFs) saw record net inflows worth 6,918 crore, the highest ever in a year. As per data from Association of Mutual funds in India (Amfi), net inflows in gold ETFs jumped a massive 328% year-on-year from Rs1,613 crore in FY20.

Inflows into gold ETFs were in line with the rally in global gold prices. In the aftermath of the pandemic and consequent disruptions in economies across the world, domestic gold prices had surged to a record high of Rs56,000 per 10 grams in August.

However, with a better-than-expected economic recovery and hardening of US bond yields, gold prices have come under pressure, correcting around 21% from their peak. But inflows have remained robust despite the correction in gold prices.

Expert feel that the second wave of covid infections could derail economic recovery and thus support gold prices going forward.

“Fluctuations in bond yields are keeping the volatility high for gold prices. Pace of gold purchases by the central bank has been slow, but consistent, supporting overall market sentiment. Rapid rise in covid cases and the impact of the same on economy and overall is increasing the panic and distress in the market. Holdings of gold-backed ETFs and similar products reached a record $3,890t by the end of September. Global investors added record amounts of gold-backed ETFs to their portfolios in the first half of 2020," said Navneet Damani, vice president, commodities research, Motilal Oswal Financial Services Ltd.

He feels that investors should use the price corrections as an opportunity to accumulate gold.

“Prices have been rallying significantly so there will be bouts of correction on the way up, which is what we are currently witnessing. Bullish trend is likely to resume soon and dip towards Rs.43,700-44,200, could be used to initiate fresh entry with upside potential to test Rs.50,000 followed by new lifetime high Rs.56500 per 10 grams," said Damani.

Gold is considered a hedge against inflation, and experts advise one should have around 10-15% allocation to gold.

Do you have a personal finance query? Send in your queries at mintmoney@livemint.com and get them answered by industry experts.)

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