Trading in gold exchange traded funds (ETFs) was robust on both the stock exchanges, NSE and BSE, on Monday despite a significant drop in gold prices in recent weeks and three consecutive months of outflows in gold ETFs.
On Monday, which also marked Akshaya Tritiya, gold ETF turnover on NSE stood at Rs 707 crore, 16% higher than the turnover of Rs 608 crore last year. The figures are based on data available on the exchange’s website at 7 pm. According to market estimates, about 3,400 kg gold ETF units were traded on the exchanges by 6 pm IST compared with 2,700 kg last year.
“There has been a significant rise in trading volumes on the exchanges this year. Even the drop in gold prices has not impacted the sentiment,” said Rajnish Rastogi, co-head, investments, Motilal Oswal AMC. “The demand for gold ETFs has picked up in last 2-3 days,” said V Balasubramanian, VP & Fund Manager, IDBI Asset Management, adding falling prices have helped boost volumes: “Unlike equities, a fall in gold prices is usually seen as an opportunity by many Indians to stock up more of the precious metal.”
Both the exchanges extended the trading hours for gold ETFs till 7 pm on Monday and waived the transaction charges for trading in the product. Brokers also offered incentives to attract investors.
Incentives were meant to lure investors who were recently seen exiting Gold ETFs after fall in global prices. The recent correction has also led analysts to predict that gold’s secular bull run is finally over. Gold has been perceived as an inflation hedge and a safe haven in times of geopolitical and financial instability. With Europe returning to financial stability and global inflation remaining in check, some fear that the demand may cool off in coming months.