India's Gold ETFs gain 4% on gold rally

February 18, 2009

Commodity Online
MUMBAI: Even as gold prices zoomed to record Rs 15,200 level on Tuesday, fueled by the economic meltdown across the world, the exchange traded funds (ETFs) in gold also soared in the Indian stock exchanges.

India's five Gold ETFs gained nearly 4 per cent in value on the National Stock Exchange.

Benchmark Mutual Fund launched the first gold ETF in India in March, 2007. At present, there are five players in the market, namely, Benchmark, Kotak, Quantum, Reliance and UTI. All these Gold ETFs hold around 5.3 tonnes of gold.

Benchmark holds 2.07 tonnes of gold, where are UTI has 1.36 tonnes, Reliance Capital 1.49, Kotak 0.36 and Quantum .05.

Though Gold collections under the ETFs are growing year on year, they remain negligible when compared to India’s imports of around 700 tonnes annually.

On Tuesday, GoldBEES, Benchmark Mutual Fund’s gold ETF touched a record high of Rs 1,504 on the National Stock Exchange and closed at Rs 1,503 per unit. Relgold (Reliance’s Gold ETF) and Goldshare (UTI MF) too touched new highs at Rs 1,466 and Rs 1,498.50 respectively.

Volumes also went up on all gold ETF counters. The number of units traded (Gold Benchmark ETF, Kotak Gold ETF, Quantum Gold, UTI Gold ETF and Reliance Gold ETF) were at twice the average volumes recorded last week. Volume in GoldBEES, the most popular of the lot, surged to 52,280 units when the average volume last week was just 24,000 units.

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Analysts said huge buying interest in gold ETFs has come on the back of spot prices of domestic gold going above Rs15,000/gm. International prices hover at $961 per ounce (a 7-month high). Rising gold prices, combined with the rupee traversing below the 49 mark to a dollar, helped the surge in domestic gold prices and ETFs.

Gold ETFs in India have delivered a return of 25 per cent in one year whereas in the same period, diversified equity funds as a category have seen a value erosion of 49 per cent.

India is the largest consumer of gold in the world. But the performance of the five companies that have launched Gold ETFs funds in the country has been below average. In Europe and US, gold ETFs have been doing wonderfully well supported by investment demand, with holdings on the ETF hitting another record on safe-haven buying driven by chaos in the banking sector. Gold ETFs track the spot price of gold and are listed on stock exchanges.

India's Gold ETFs together hold around 5.3 tonnes of gold, whereas globally Gold ETFs hold nearly 1,400 tonnes of gold.

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