New Delhi: Consumers in India have long valued gold in all its glittery splendour, but the country’s financial sector is hoping surging prices can finally lure more people into investing in gold-backed paper.
The sector is set to launch 2-3 new gold-backed, exchange traded funds over the next six months, industry officials say, so investors can participate in the metal’s bull run.
With the launch of the latest ETF by Reliance Capital Asset Management, India’s largest mutual fund, there are now four gold-backed funds to invest in.
The gold behind the funds has risen to 4.7 tonnes from over 3.0 tonnes at the end of October and 2.73 tonnes in May.
India is the world’s largest buyer of physical gold and the elaborate high quality jewellery is tightly interwoven with the country’s culture. There has, however, been much doubt whether the country would ever embrace gold as an investment vehicle in a big way.
“Our estimate is that 5% of India’s gold demand, which is about 40 tonnes, should come from ETFs in the next 12 to 18 months,” said S Kannan, associate vice-president of Kotak Commodities.
He said the change was expected as investors were beginning to break away from their traditional view that gold was a savings instrument, only to be sold during times of distress.
“There is a metamorphosis happening gradually,” Kannan said. “It is one of the most effective vehicles for riding the bull run in gold.”
Another analyst said that he saw the present volume and investments are likely to grow by 50 to 75% in the coming year.
“The awareness level is increasing,” said Ashok Mittal, vice president and country head for the commodity brokerage of Karvy.
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