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Gold ETFs: Volumes high; firm Re caps return
Gold prices triggering interest in Gold-Exchange Traded Funds (Gold ETFs).
However, Indian investors who bet on gold-ETFs a month ago have not participated actively in the recent rally. Their returns have been depressed, capped by the rising rupee. Despite the 5 per cent run up in international gold prices in the last one month, prices for domestic gold-ETFs are where they were last month. GoldBEeS, Benchmark Mutual Fund’s gold-ETF, which closed flat in Wednesday’s trade, has been hovering around Rs 1,570-levels for the last one month.
The spurt in gold prices in the international markets, from $1,000 last month to $1,053/ounce, follows the weakness in dollar on fears of a fall in the currency’s value. However, this has lent strength to the rupee, thus muting returns for investors. GoldBEeS, Goldshare (UTI Mutual Fund) and Relgold (Reliance Mutual Fund) all are below their last month highs. When gold crossed $1000 on September 8, all these funds reported new highs.
As gold’s price appreciated 5 per cent in the last one month, rupee’s value also appreciated close to 5 per cent against the dollar; from Rs 48.6 on September 8 to Rs 46.3 as of Wednesday’s close.
The rupee’s strength again follows the huge cash flows into the country from the foreign institutions. EPFR Global has reported that India-specific funds saw inflows at a nine-week high in the last week of September.
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BAMC is an asset management company in India with a primary focus on indexing and using quantitative techniques in creating innovative products. Benchmark is run by professionals with a long experience in the Indian and International Financial Markets.