Synopsis: In January 2025, Gold Exchange-Traded Funds (ETFs) in India experienced an unprecedented surge, with net inflows reaching a record Rs. 3,751.4 crore. This significant increase, up from Rs. 640 crore in December 2024, reflects a growing investor preference for gold amid global economic uncertainties and market volatility.
Record-Breaking Inflows into Gold ETFs:
According to data from the Association of Mutual Funds in India (AMFI), January 2025 witnessed the highest-ever monthly net inflow into gold ETFs, amounting to Rs. 3,751.4 crore.
This marks a substantial 486% increase from the Rs. 640 crore recorded in December 2024.
Year-over-year, the inflows surged by approximately 471%, rising from Rs. 657 crore in January 2024.
Consequently, the assets under management (AUM) for gold ETFs grew by 16%, from Rs. 44,595 crore in December 2024 to Rs. 51,839 crore in January 2025.
Factors Driving the Surge:
Several key factors have contributed to this remarkable growth:
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Global Economic Uncertainty: Ongoing geopolitical tensions and market volatility have heightened investors' risk aversion, prompting a shift towards safe-haven assets like gold.
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Discontinuation of Sovereign Gold Bond (SGB) Scheme: The central government's decision to discontinue the SGB scheme, due to high borrowing costs, has led investors to seek alternative gold investment avenues, with gold ETFs emerging as a preferred choice.
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Interest Rate Expectations: Anticipated interest rate cuts by major central banks, including the U.S. Federal Reserve, have increased gold's attractiveness. Lower interest rates reduce the opportunity cost of holding non-yielding assets like gold, thereby enhancing its appeal.
Performance of Gold ETFs:
In addition to attracting substantial inflows, gold ETFs delivered impressive returns in January 2025, offering an average gain of approximately 7.29%.
This performance underscores gold's role as a hedge against inflation and a reliable store of value during periods of economic instability.
Conclusion:
The record-breaking inflows into gold ETFs in January 2025 highlight a significant shift in investor sentiment towards safe-haven assets amid global economic uncertainties.
The discontinuation of the SGB scheme and expectations of favourable monetary policies have further reinforced gold's appeal.
As market volatility persists, gold ETFs are poised to remain a preferred investment vehicle for those seeking diversification and stability in their portfolios.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investors are advised to conduct their own research or consult with a financial advisor before making investment decisions.
