What Is Gold ETF? How Is The Gold ETF performing Globally: Should You Invest?


oi-Kuntala Sarkar


Gold ETFs are known as gold exchange-traded funds, but the price of the Gold ETFs will depend on the domestic physical gold rate. Gold ETFs will invest in gold bullion, and be considered as Dematerialized (electronic) form. To measure, a Gold ETF unit is equal to 1 gram of pure gold. You can buy gold ETFs from the mutual fund apps like Groww, Zerodha, etc., that are traded on NSE and BSE.

What Is Gold ETF? How Is The Gold ETF performing Globally: Should You Invest?

At the time to redeem the Gold ETF, you get the money back on your bank account, and buying and selling of Gold ETFs are very easy just like trading other company stocks. With the growth and fall of gold rates, the unit price of the gold rate will change. Buying a gold ETF will save your money to store the gold at bank lockers. Additionally, in that case, you can save the making charges that are applicable for gold coins and gold jewelleries.

According to the latest World Gold Council (WGC) Report, Gold ended in November marginally higher by increasing 2% MoM to US$1,804.4/oz. The high inflation rate is influencing the gold ETFs market to grow gradually, globally. WGC said that global gold ETFs had their first month of inflows since July, and developed market central banks added gold to their reserves for the first time since 2013.

The trend of Gold ETFs has increased significantly since the last month. The latest World Gold Council report titled ‘Global gold-backed ETF flows – November 2021’ informed, “Gold-backed ETFs experienced net inflows of 13.6 tonnes (t) (US$838mn, 0.4% AUM) in November, the first month of positive flows since July. Inflows into North America and Europe well exceeded outflows from Asia, which saw negative flows for the first time since May.” However, global gold ETF holdings have rebounded from year-to-date lows, increasing the gold market volatility.

Gradually, investors are realizing the importance and benefits of gold ETFs – a similar investment like gold, but with a far easy liquidity procedure. Gold is a hedge against inflation, and since the last year, common citizens have shown enhanced interest in gold. During lockdowns, buying physical gold was tough. So, people started

Gold ETF market in North America and European

Both North American and European gold ETFs contributed to November’s inflows, a reversal from the headwinds faced by larger funds in these regions for much of this year. “North American ETFs had inflows of 12.1t (US$744mn) driven by gains from major US funds likely impacted by positioning around options expiration of listed gold ETFs in mid-November, resulting in the creation of new shares. Similarly, larger funds in the UK and France led inflows within Europe, which added 5.6t (US$333mn) in total” WGC added.

Gold ETF market in Asia

However, the Asian ETFs had outflows of 5.0t (-US$297mn), primarily due to tactical selling in China as the local gold price increased and equity markets stabilized, while holdings recovered towards the end of the month when gold prices declined. This was partially offset by inflows in India, driven by seasonal demand surrounding the Diwali festival and a correction in the local stock market later in November. However, the increasing worries about inflation will improve the gold ETFs demand, along with physical gold. Certainly, new investors should explore the Gold ETFs sphere to diversify their investments and de-risk their portfolios. Additionally, digital gold is also another option to explore.

(Also read: What Are The Differences Between Gold ETFs And Gold Funds)

(Also read: What is Digital Gold? What Are Its Advantages? Should One Invest?)

Story first published: Wednesday, December 15, 2021, 12:34 [IST]

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