On a day when gold prices fell to Rs 27,758/10 g, the volumes of gold exchange-traded funds on both the BSE and NSE have seen a huge spurt.
“At every price point correction, there will be some buying action and today's steep fall in the gold price led to some discount to the NAV (net asset value) of the gold ETFs,” said Ms Lakshmi Iyer, Head, Fixed Income and Products, Kotak Asset Management.
“This was an opportunity to sell for a lot of those investors who had rushed into these funds when gold prices were first on the rise. That is what we saw on the exchanges today,” said Mr Lalit Nambiar, Senior Vice-President, Fund Manager and Head-Research, UTI Asset Management.
Fund analysts said this was expected as investors are looking for an opportunity to buy gold.
In the past one year, assets under management of gold ETFs have risen 176 per cent to Rs 9,568 crore in November 2011 from Rs 3,464 crore in November 2010. Major drivers of this increase have been uncertain market conditions along with a spurt in systematic investment plans. Besides, the rise in gold prices helped assets under management grow.
“Generally, physical gold is available at a premium while gold ETFs are available at a discount. This makes investing in gold ETFs a better option for most investors,” said Mr Surajit Misra, Executive Vice-President and National Head-Mutual Funds, Bajaj Capital.
Fund managers said if the fall sustains, then it is a matter of concern. However, as of now this only seems to be an anomaly in gold ETF trades. The dollar rally may have caused a drop in gold prices, but this is not expected to last long. With uncertainty still plaguing the global economy, gold will continue to be a hedge for most investors, said fund managers.