Gold ETFs Emerge as Attractive Investment Amidst Quest for High Returns: ICRA Analytics

Gold ETFs (exchange-traded funds) are gaining popularity in India as safe investment options. Factors driving this demand include perceived safety, attractive returns, and convenience. Gold ETFs are backed by physical gold and offer similar returns, but with lower costs compared to physical gold. They are tightly regulated and traded on stock exchanges, making them a transparent and accessible investment vehicle. As of April 2024, the net assets under management for gold ETFs in India have grown by 43% compared to the previous year, showcasing the increasing interest in this type of investment.

There is an increase in demand for gold exchange-traded funds (ETFs) in India as they are being considered safe investment options, according to ICRA Analytics.

The change is attributed to several key factors such as perceived safety, attractive returns, and the convenience offered by ETFs.

''There is a growing appetite for investing in gold ETFs (exchange-traded funds), which are increasingly being considered as safe investments governed by tight regulations.

''Furthermore, a significant number of these ETFs have delivered exceptional one-year returns exceeding 18 per cent,'' Ashwini Kumar, Senior Vice President and Head Market Data, ICRA Analytics, said.

According to the data available on the AMFI (Association of Mutual Funds in India) website, gold ETFs witnessed net inflows worth about Rs 2,028.05 crore during the January-March period.

''Gold ETFs are comparatively safer as they are governed by tight regulations and are traded on exchanges on a real-time basis.

''Moreover, the price of gold and its returns in an ETF is the same as physical gold, and the cost of buying a gold ETF is lower as compared to buying the yellow metal,'' Kumar added.

The net assets under management (AUM) under gold ETF as on March 31, 2024, grew by nearly 37 per cent to touch Rs 31,224 crore, as against Rs 22,737 crore in the same period last year.

As of April 30, 2024, the net AUM under gold ETF increased 43 per cent to touch Rs 32,789 crore, as compared with Rs 22,950 crore in the same period last year, as per AMFI data.