Gold ETF Inflows In India Ease For A Second Straight Month, Marking A Continued 10-month Run

India’s gold exchange-traded funds (ETFs) continued to attract inflows for the tenth consecutive month in March, although the pace of investment declined significantly, according to data from the World Gold Council.

Invest in Indian Markets and Unlock Future Potential With 5paisa!

Open Account Now

Inflows Moderate In March

Gold ETFs saw net inflows of $176.6 million in March, which was a fall of 68% from the $576 million witnessed in February, according to the World Gold Council. 

Though the inflow trend slowed, it was not broken, as the flow has been positive for ten months now. The reduced level of inflow was also concurrent with increased price volatility in gold.

Gold Price Movement

Prices of gold fell by 11.6% in March, marking the highest fall in prices for that month since October 2008, according to statistics provided by the World Gold Council. 

This dramatic fall in the price of gold affected the investment flow, where more outflows prevailed than inflows. As March drew to an end, there were slight inflows due to rising prices of gold.

Global ETF Trends

The net outflow for the continent was USD 13 billion in March, breaking an eight-month streak of net inflows, according to the World Gold Council. The region experienced long streaks of net inflows previously during the Global Financial Crisis and the COVID-19 pandemic.

Meanwhile, China saw net inflows in March, driven by the need for haven assets due to geopolitical events, poor domestic equity markets, and currency dynamics.

Factors Impacting Flows

According to the World Gold Council, the selling pressure continued even during March, fueled by the prevailing risk-off environment associated with geopolitics. Operation Epic Fury was one such instance where the risk-off environment had affected all asset classes, resulting in investors exiting their holdings in gold.

The strength of the U.S. dollar, coupled with an increase in interest rates, further impacted gold buying by making gold expensive to hold due to opportunity costs. Another reason for increased gold uncertainties was the changes in rate expectations. Interest rates are now expected to be stable through September 2027.

European Market Trends

The sales were quite substantial for nations such as Germany, Italy, and France for the month of March. According to the World Gold Council, there was a strong connection between price action and flows in the European region. Flows turned out negative at the end of March as the prices dropped.

The European Central Bank did not change its monetary policy in March but made an announcement about being prepared to take action in case of rising inflation. The rise in interest rates and currency depreciation contributed to gold flows in Europe.

The information shows that even though India has seen continuous inflows in gold ETFs for ten months, international factors played their role in March.