By Paul Ploumis 15 Jun 2015 Last updated at 08:23:18 GMT
MUMBAI (Scrap Monster): The assets under management (AUM) of gold-backed Exchange Traded Funds (ETFs) in India continued to drop sharply in the month of May this year. The assets have been posting huge outflows for the past several months. The investor’s apathy to gold ETFs have dragged the AUMs to multi-year lows, according to the latest asset data published by the Association of Mutual Funds in India (AMFI).
As per data, the total AUM of gold ETFs has declined to Rs 6,688 crore in May this year. This is the lowest level recorded since July 2011. The outflows during the month totaled Rs 86 crore, rising by almost 25% when compared with the outflows of Rs 69 crore during the month before. The gold assets in ETFs have witnessed 24 consecutive months of outflows. Nearly Rs 3,900 crore has been redeemed from gold ETFs in the country over the past two years.
The negative outlook on gold by various agencies is believed to have triggered fresh spell of outflows from gold assets. The prices of the yellow metal have dropped by nearly 0.3% during May this year.
The future of gold prices depends much on the timing of US Fed’s rate hike decision. Most analysts are of the view that gold prices are likely to remain subdued during 2015. Any rate hike by US authorities may lead to sharp drop in gold prices. India Ratings and Research (Ind-Ra) predicts domestic gold prices to average between Rs 20,500 per 10 grams and Rs 24,000 per 10 grams, in the event of a rate hike. This is significantly lower when compared with the current levels of nearly Rs 27,000 per 10 grams.
Meantime, global gold backed ETFs have been reporting constant outflows for several months now. The holdings in SPDR Gold Trust-the world’s largest gold-backed ETF had plunged to their lowest levels since 2008 on Friday. Also, holdings in top eight gold ETFs had hit five-year low last Monday.
