Gold Exchange Traded Funds (ETFs), where money is parked in bullion, have seen their assets rising over 15 per cent in last two months, but analysts feel investors should wait since a correction in gold prices is round the corner.
Gold ETFs are open-ended mutual fund schemes that invest the money collected from investors in standard gold bullion. Gold ETFs are traded in exchanges and each unit of a gold ETF is equivalent to 1 gm of gold.
The soaring gold prices, mainly on account of uncertainty in global economic recovery and stock market volatility, have made Gold ETFs more attractive for investors. "Investors should go slow in investing in gold ETFs as the market is waiting for some correction to happen," Kotak AMC's Head (Products) Lakshmi Iyer said.
"Gold has seen a huge run-up so far which suggests that whenever there is some correction, one should put 5-10 per cent of the overall portfolio in gold ETFs with a long term horizon," Iyer added.
As per data from Association of Mutual Funds of India (Amfi) assets under management of Gold ETFs rose 15.5 per cent to Rs 1,837 crore in May compared to Rs 1,590 crore in March.
Value Research CEO Dhirendra Kumar said with gold prices touching new highs, the real consumption has disappeared and there is lot of volatility in the market. "One should stay away from gold ETFs since its scale of business is too small in India and there are other places like equities and mutual funds where you can invest," he noted.
On the other hand, soaring gold prices have also resulted in redemption pressure on Gold ETFs. In May, these funds saw a net outflow of Rs 6 crore, as many investors booked profits. Last month, Gold ETFs witnessed an inflow of Rs 80 crore while the outflow stood at Rs 86 crore.