With equity markets improving, gold as an asset has lost its appeal
Picture used for representational purpose. (photo: DC/file)
Mumbai: With the outlook for the equity markets improving substantially over the past couple of months, gold as an asset class has lost its investment appeal among investors. According to fund managers, gold exchange traded funds (ETF) are not seeing any major action as investors are now flocking more towards the equity markets.
“The appetite for gold as an investment product has come down and we are not seeing any substantial actions in Gold ETF’s. What the industry is seeing now is a steady and gradual outflow of funds from these schemes,” said Lakshmi Iyer, head of fixed income and products at Kotak Mutual Funds.
Most of the gold ETF’s have generated flat returns over the past one-year with some of the schemes even slipping into the negative territory. According to the data available with Value Research, a mutual fund tracking firm, Gold ETF’s have given a negative return in the range of 1–8 per cent over the last three months.
While the ongoing geo-political tensions in Ukraine and West Asia had brought the yellow metal back on the investor’s radar, bullion experts said that it is not sufficient enough for gold to stage a major upside from the current levels.
“Overall the gold as an asset class is in a bearish phase and we don’t expect it to deliver positive returns for another few years. While the prevailing political tensions in West Asia and Ukraine did see some kind of demand coming back, the yellow metal couldn’t sustain the momentum as most of the negatives have already been factored in. Unless, these political tensions spiral out of control, gold as an asset class would continue to remain a laggard,” said Naveen Mathur, associate director, commodities and currencies at Angel Broking.
The prices of gold in the domestic market is currently trading at around Rs 28,000 per 10 gram while its prices in the international market is now quoting just above $1,300 per ounce. According to C.P. Krishnan, whole time director, Geojit Comtrade, if the price of gold doesn’t breach the $1,400 per ounce in the global market, it is not expected to see much buying interest from investors.
“US is witnessing a rebound in its economic growth. So funds are moving away from safer assets to more risky assets like equities, which is the case with India too. So gold is expected to trade with a negative bias going forward. The yellow metal will be able to regain its investment appeal only if there is a high degree of uncertainty over the global economic growth or if the political crisis in Eastern Europe and West Asia escalates further,” added Mr Krishnan.
( Source : dc correspondent )
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