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Gold ETFs' 3-Month Returns Fall

Fund numbers plummet on the NSE

After the gains notched up in February, when gold prices were ruling at a high of Rs 15,295 for 10 grammes, gold ETFs have been heading southwards, statistically speaking. As of May 14, 2009, while the gold ETF category is the best performing one across all the mutual fund categories in the one-year and two-year time horizons, it has become one of the worst-performers in recent times as far as the 3-month returns are concerned.

The major reason thereof, is that the stock markets are up and people are looking to book some profits from short-term gains (by selling gold and buying shares), leading to the fall of gold from its recently-high prices. According to the numbers, while gold ETFs have shed 6.27 per cent in the last two months -- March and April -- Sensex has gained around 50 per cent from the lows it hit in early March this year.

Consequently, this has led to gold ETFs too losing ground as is witnessed by these funds logging a decline in the Average Assets Under Management (AAUM) from February to April. There was an increase in assets of gold ETFs from Rs 721.64 crore in January to Rs 764.04 crore in February which was a rise of 5.87 per cent. But since then, there has been a drop. While assets declined 1.05 per cent and 7.16 per cent in March and April respectively, the number of units traded on the National Stock Exchange (NSE) between February and April too collapsed.

The total traded quantity of Benchmark’s gold ETF, Gold BeES (the first gold ETF in India launched by Benchmark Mutual Fund) declined from 689,344 units in February to 479,331 units in March and to 3,04,007 units in April.

UTI Gold ETF too witnessed its traded quantity fall from 162,782 units in February to 71,861 units in April. The units traded of Reliance Gold ETF too declined from 166,307 units in February to 62,308 units last month. In Kotak Gold ETF, the number of units traded in February was 57,595, which came down to 22,729 in April.

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