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Gold ETF Inflows Halve in March as Middle East Tensions Spook Investors

Gold exchange-traded fund (ETF) inflows in India sharply declined in March, more than halving to Rs 2,266 crore from February's Rs 5,255 crore. The slowdown is attributed to geopolitical uncertainties, particularly tensions involving the United States and Iran, which dampened investor sentiment. Concurrently, domestic gold prices corrected by around 11% in March, further reducing investor appetite despite gold's traditional safe-haven status. Globally, the trend was more severe, with gold ETFs witnessing a record monthly outflow of $12 billion in March.

Key Points: Gold ETF Inflows Drop Over 50% in March Amid Geopolitical Tensions

  • Inflows more than halved to Rs 2,266 crore
  • Geopolitical tensions in Middle East cited
  • Domestic gold prices fell 11% in March
  • Global ETFs saw record $12B outflow
  • Total AUM in India remained robust at Rs 1.71 lakh crore
2 min read

Gold ETF inflows decline in March as Middle East tensions weigh in

Gold ETF inflows in India plunged to Rs 2,266 crore in March, more than halving from February, as Middle East tensions and falling prices weighed on sentiment.

Gold ETF inflows decline in March as Middle East tensions weigh in
"The drop came due to geopolitical uncertainties, particularly surrounding tensions involving the United States and Iran, weighed on investor sentiment. - Association of Mutual Funds in India"

Mumbai, April 10

Gold exchange-traded funds in India witnessed a sharp slowdown in inflows in March as net inflows into gold ETFs more than halved to Rs 2,266 crore during the month, according to data released by the Association of Mutual Funds in India on Friday.

This marks a significant decline from February, when investors had poured a net Rs 5,255 crore into these funds.

The drop came due to geopolitical uncertainties, particularly surrounding tensions involving the United States and Iran, weighed on investor sentiment.

Gold ETFs, which track the price of physical gold, are considered a convenient and tax-efficient investment option as they eliminate the need for storage and security concerns associated with holding the metal physically.

At present, there are 25 such schemes available to investors in India. The dip in inflows came at a time when gold prices corrected sharply.

In the domestic market, gold prices fell around 11 per cent in March, mirroring the decline in the benchmark Nifty index during the same period.

The fall in prices appears to have dampened investor appetite, even as gold traditionally serves as a safe-haven asset during periods of uncertainty.

Despite the slowdown in inflows, the total assets under management (AUM) of gold ETFs remained robust.

As of March 31, the AUM stood at Rs 1.71 lakh crore. This figure also reflects the impact of earlier gains in bullion prices, which had supported overall asset growth.

Globally, however, the trend was even more pronounced. Data from the World Gold Council showed that gold ETFs recorded outflows of $12 billion in March, marking the largest monthly withdrawal on record.

The sharp outflows disrupted expectations of what was anticipated to be the strongest quarter for global gold ETF inflows.

Even so, on a broader horizon, gold ETFs globally have managed to log a seventh consecutive quarter of net inflows, as per the report.

- IANS

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Reader Comments

P
Priya S
Interesting data. But in my family, we still prefer physical gold for weddings and festivals. ETFs are for my portfolio, but nothing beats the feeling of holding actual jewellery! 🪙 The price correction might make me buy some physical gold this Akshaya Tritiya.
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Rohit P
The AUM is still Rs 1.71 lakh crore! That's the key takeaway. A temporary slowdown doesn't change the fundamental role of gold in an Indian investment basket. When equity markets correct further, money will flow back into gold ETFs. Mark my words.
S
Sarah B
As an NRI, I find this trend a bit surprising. With global uncertainty, I'd expect more inflows, not less. Maybe Indian investors are more directly impacted by local price corrections than global safe-haven sentiment. The 11% domestic price fall is significant.
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Vikram M
Respectfully, I think the article misses a key point about investor psychology in India. When prices fall sharply, many see it as a loss, even on paper, and stop their SIPs. We need more financial literacy that a falling price is an opportunity to accumulate more units, not panic.
K
Karthik V
Good analysis. The correlation with Nifty's decline is telling. Probably, money moved from gold ETFs to buy the dip in equities. It's all about asset allocation. Right now, equities on sale might look more attractive than gold for some investors.

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