Gold ETFs back in demand! Investors are showing renewed interest in gold Exchange Traded Funds (ETFs) due to the absence of new Sovereign Gold Bond (SGB) offerings from the government and recent tax rate reductions on funds backed by the precious metal.
In the past four months, gold ETFs, which are traded on stock exchanges, have witnessed inflows amounting to Rs 4,500 crore, compared to Rs 4,728 crore in the entire financial year that concluded in March 2024.
Gold has provided a return of 19.44% in the past year, compared to the Nifty’s 25% gains, according to an ET report. The government’s recent budget decision to reduce long-term capital gains tax on gold from the investor’s tax slab to 12.5% for holdings over two years is also encouraging ETF purchases.
Viral Bhatt, founder of Money Mantra says, “Favourable taxation for gold post-budget, reduction in customs duty, fall in gold price and no fresh issue of Sovereign Gold Bonds are driving a set of investors towards gold ETFs.”
Also Read | Gold price outlook: Is precious metal still a good investment bet post import duty cut? Here’s why you shouldn’t dismiss it!
Previously, gold ETFs had lost their appeal among investors due to the regular issuance of SGB tranches. These bonds offered an additional 2.5% annual interest on top of capital gains, had no fund management fees, and capital gains were tax-exempt if held until maturity. In FY24, investors invested over Rs 27,000 crore in SGBs.
As various reports suggest that the government may not issue new SGB offerings, investors are opting to purchase either gold ETFs or existing SGBs listed on stock exchanges.
Investors who have completed their eight-year tenure in SGBs and received maturity money are now contributing to the demand for gold ETFs, according to distributors.
Nikhil Gupta, founder of Sage Capital, says, “Some series of sovereign gold bonds have matured and investors looking to maintain allocation to gold, are now redeploying it into gold ETFs.”
Fund managers believe that gold prices will remain strong due to ongoing geopolitical uncertainties.
Chirag Mehta, chief investment officer at Quantum Mutual Fund, says, “The trend of investments into gold and diversification of reserves continues.” He adds, “We believe this trend is likely to continue this year amid geopolitical uncertainties in Middle East, elections in Europe, the US and central banks buying to diversify reserves. These would continue to support gold prices.”
In the past four months, gold ETFs, which are traded on stock exchanges, have witnessed inflows amounting to Rs 4,500 crore, compared to Rs 4,728 crore in the entire financial year that concluded in March 2024.
Gold has provided a return of 19.44% in the past year, compared to the Nifty’s 25% gains, according to an ET report. The government’s recent budget decision to reduce long-term capital gains tax on gold from the investor’s tax slab to 12.5% for holdings over two years is also encouraging ETF purchases.
Viral Bhatt, founder of Money Mantra says, “Favourable taxation for gold post-budget, reduction in customs duty, fall in gold price and no fresh issue of Sovereign Gold Bonds are driving a set of investors towards gold ETFs.”
Also Read | Gold price outlook: Is precious metal still a good investment bet post import duty cut? Here’s why you shouldn’t dismiss it!
Previously, gold ETFs had lost their appeal among investors due to the regular issuance of SGB tranches. These bonds offered an additional 2.5% annual interest on top of capital gains, had no fund management fees, and capital gains were tax-exempt if held until maturity. In FY24, investors invested over Rs 27,000 crore in SGBs.
As various reports suggest that the government may not issue new SGB offerings, investors are opting to purchase either gold ETFs or existing SGBs listed on stock exchanges.
Investors who have completed their eight-year tenure in SGBs and received maturity money are now contributing to the demand for gold ETFs, according to distributors.
Nikhil Gupta, founder of Sage Capital, says, “Some series of sovereign gold bonds have matured and investors looking to maintain allocation to gold, are now redeploying it into gold ETFs.”
Fund managers believe that gold prices will remain strong due to ongoing geopolitical uncertainties.
Chirag Mehta, chief investment officer at Quantum Mutual Fund, says, “The trend of investments into gold and diversification of reserves continues.” He adds, “We believe this trend is likely to continue this year amid geopolitical uncertainties in Middle East, elections in Europe, the US and central banks buying to diversify reserves. These would continue to support gold prices.”