As equity and bond markets started moving down with the global credit crisis, the prices of gold soared with investors seeking safer avenues of investment.
In tandem with gold prices, the value of gold exchange traded funds have been going up in India. Even as gold hit a high of Rs 13,495 for 10 grammes on Monday, gold exchange traded funds hit their 52-week highs. There are five gold exchange traded funds from Benchmark, UTI, Kotak, Reliance and Quantum mutual funds traded on the National Stock Exchange.
“The average traded value of our fund has gone up from Rs 1 crore to Rs 2 crore a day to Rs 4 crore in the past month,” said Sanjiv Shah of Benchmark Asset Management. On Tuesday the volume touched Rs 6.4 crore and the price of their gold exchange traded fund at close was Rs 1,324.
Gold exchange traded funds allow customers to hold gold in the form of units that can be bought and sold on the stock exchange. Gold exchange traded funds that collect money from investors holds gold in physical form, equivalent to the value of the investment. The underlying gold benchmark asset management company holdings have gone up to 1.5 tonnes from 1 tonne at the time of the fund launch. UTI’s fund had collected Rs 140 crore at the time of launch and held 1.3 tonnes of gold.
But awareness about investment in gold through funds is still low, admits the person in charge of marketing these funds at one of the leading asset management companies. “As an asset, gold will lend stability to the portfolio, if not appreciate. We are trying to popularise the product,” he said.