Gold ETFs' Inflow Declines 40% To Rs 1,256 Crore In July

Inflow in Gold Exchange Traded Funds declined 40% month-on-month to Rs 1,256 crore in July, weighed down by concerns over high gold prices, particularly with ongoing news around tariffs.

Despite this drop, July's numbers mark the third consecutive month of positive flows.

Santosh Joseph, CEO, Germinate Investor Services, said that gold has been a difficult investment for investors to fully gauge, despite having delivered a strong performance over the last two years. Month after month, there is growing concern about whether investors are buying at elevated levels.

"Investors are still grappling with how to position gold in their portfolios. There is a genuine concern about high gold prices, particularly with ongoing news around tariffs. While many investors want some allocation to gold as a hedge, they remain cautious given the current price levels," he added.

According to data from the Association of Mutual Funds in India, Gold ETFs attracted a net inflow of Rs 1,256 crore in July, a moderation from Rs 2,081 crore registered in June.

This came following a net inflow of Rs 292 crore in May. Before this, the category witnessed a net outflow of Rs 6 crore in April and Rs 77 crore in March.

With this, Gold ETFs have garnered cumulative inflows of over Rs 9,277 crore in this year January-July. This indicates product growing role as a strategic allocation in portfolios, both for wealth preservation and as a counterbalance to risk assets.

The inflow led to an expansion in the category's assets under management, rising 4.4% to Rs 67,634 crore in July from Rs 64,777 crore in the preceding month.

Nehal Meshram, Senior Analyst - Manager Research, Morningstar Investment Research India, believes that the sustained demand reflects gold’s continued appeal as a portfolio diversifier amid lingering macro uncertainties, including volatile global interest rate expectations and geopolitical risks.

"While prices have remained elevated, investor interest appears supported by central bank buying trends globally and persistent concerns over equity market volatility. Domestic investors are also likely viewing gold allocations as a tactical hedge ahead of key economic data releases and policy decisions in the coming months," she added.

In the local markets, gold of 99.5% purity dipped Rs 1,000 to Rs 1,01,100 per 10 grams inclusive of all taxes on Tuesday.

Gold, with its superlative performance over the last few years, has garnered substantial investor interest, and the consistent increase in folio numbers serves as a testament to its attractiveness.

The folio numbers in gold ETFs rose by 2.15 lakh to 78.69 lakh in the month under review from 76.54 lakh in June. This suggests a growing inclination among investors towards funds related to gold.

Gold ETFs, which aim to track the domestic physical gold price, are passive investment instruments that are based on gold prices and invest in gold bullion. 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 investments and the simplicity of gold investments.