Gold ETFs witness huge capital outflow in April-November owing to Rs 588 crore profit booking

Gold exchange-traded funds (ETFs) saw an outflow of Rs 69 crore in November, taking the total to Rs 588 crore in the first eight months of the current fiscal, mainly due to profit-booking.

The latest funds pullout follows investors bringing in a net Rs 20 crore in October, its first inflow in nearly three and a half years, driven mostly by a rise in demand during the festive season.

The outflow meant asset under management (AUM) of gold funds plunged by more than 5 per cent last month.

According to the latest data available with Association of Mutual Funds in India (Amfi), a net sum of Rs 69 crore was pulled out of 14 gold-linked ETFs in November.

This takes the total outflow to Rs 588 crore in the first nine months (April-November) of the ongoing fiscal, 2016-17.

The asset base of gold exchange traded funds dropped to Rs 5,737 crore at the end of November from Rs 6,047 crore in October-end.

Trading in the gold ETF segment has been tepid in the last three financial years too. They had witnessed an outflow of Rs 903 crore, Rs 1,475 crore and Rs 2,293 crore in 2015-16, 2014-15 and 2013-14, respectively.

The pace of outflow slowed in 2015-16 as against the preceding two years on account of a sluggish equity market.

“Barring October, gold ETFs have seen net outflows for the whole of this fiscal. October saw net inflows propped up marginally by festival demand and that trend reversed in November,” FundsIndia.Com Head of Mutual Fund Research Vidya Bala said.

“Globally, too, November has been a weak month, marked by outflows in gold ETFs as financial markets remained positive, post (Donald) Trump’s victory. That domestic gold delivered about 15 per cent in the past one year could also have seen some investors, who were waiting for opportunities to exit, book profits in the instrument,” she said.

Gold ETFs are passive investment instruments that are based on gold prices and invest in gold bullion. There is a complete transparency on the holdings of an ETF because of its direct gold pricing.