The year 2024 has been a remarkable one for gold investors, with gold delivering stellar returns. This surge has positively impacted Gold Exchange Traded Funds (ETFs), making them a popular choice for those seeking high returns and portfolio diversification. According to data from the Association of Mutual Funds in India (AMFI), the Assets Under Management (AUM) of Gold ETFs have risen by 64% in the past year, reaching ₹44,200 crore. Notably, in November alone, Gold ETFs attracted investments worth ₹1,257 crore.
Why Invest in Gold ETFs Now?
Gold has emerged as a preferred asset class for investors due to multiple factors:
- Geopolitical Tensions: Persistent global conflicts and uncertainties are driving demand for safe-haven assets like gold.
- High Inflation: Despite efforts to control inflation, it remains elevated, increasing gold’s appeal as a hedge.
- Weak Market Sentiment: Uncertainty in equity markets has prompted investors to seek safer alternatives.
Investors now prefer paper gold (Gold ETFs) over physical gold because it eliminates issues related to storage, safety, and liquidity, making it a more convenient and efficient investment option.
Gold ETFs: Performance Highlights
Most Gold ETFs have delivered robust returns of 21-22% over the past year. Some top-performing funds include:
- Kotak Gold ETF
- LIC Gold ETF
- HDFC Gold ETF
- Mirae Asset Gold ETF
The leading Gold ETF by AUM is Nippon India Gold ETF, with an AUM of ₹15,247.92 crore. It is followed by:
- SBI Gold ETF (₹2,468.54 crore)
- HDFC Gold ETF (₹2,287.29 crore)
Why Gold Should Be in Your Portfolio
Experts believe that gold should constitute 5-10% of an investment portfolio, especially in the current market environment. According to Himanshu Srivastava, Associate Director at Morningstar Investment Research India, gold is essential for portfolio diversification.
Benefits of Gold ETFs Over Physical Gold:
- No Storage Hassle: ETFs eliminate the need for physical storage.
- High Liquidity: Easily tradable on stock exchanges.
- Cost Efficiency: Lower costs compared to buying, storing, and insuring physical gold.
- Transparency: Gold ETFs track gold prices accurately.
Outlook for Gold in 2024
Given the ongoing geopolitical uncertainties and persistent inflation, gold prices are likely to remain strong in 2024. As investors look to safeguard their portfolios, Gold ETFs offer a reliable and high-performing investment avenue.
Conclusion
Gold ETFs have emerged as a preferred investment vehicle, providing high returns and portfolio stability in uncertain times. With robust growth in AUM and strong performance, they are an excellent option for those looking to invest in gold without the complications of physical gold.
If you’re an investor seeking to diversify your portfolio or hedge against inflation, consider adding 5-10% of your portfolio to Gold ETFs for optimal returns and risk management in 2024.
