MUMBAI (Commodity Online): If gold prices are soaring and more investors are flocking to the yellow metal, can gold exchange traded funds (ETF) be far behind?

Gold ETFs recorded a new high this week tracking the sharp rally in international gold prices. Domestic gold ETFs moved higher tracking the international gold prices. GoldBeES, Benchmark Mutual Fund’s gold ETF, touched its lifetime high of Rs 1,583 (previous high – Rs 1,574 in February 2009) on Tuesday. Goldshare (UTI Mutual Fund) and Relgold (Reliance Mutual Fund) also rose to new highs at Rs 1,589 and Rs 1,590 respectively.

According to analysts, investors are shifting their attention to gold which has outperformed equity and debt funds over the last 12 months.

International gold prices moved above $1000/ounce on this week. A weak dollar and fears of accelerated inflation derailing earnings of corporates caused money to flow into safer havens like gold.

This sharp price increase has made traders veer towards gold once again. The NSE has reported a two-fold increase in volumes in gold ETF counters in the last three days.

Against the 10-11 per cent return delivered by equity and debt funds over a one-year period, Gold ETFs have delivered a staggering 36 per cent return.

Gold typically underperforms when equity markets are on an upswing. During the last six months when the stock prices rose from a nadir, equity diversified funds returned 92 per cent whereas Gold ETF delivered only a 1.34 per cent return in this period.

The total holdings of the gold exchange traded funds (excluding Reliance Gold ETF) rose from 3.9 tonnes in August last year to 4.05 tonnes now, a 4 per cent increase. However, Benchmark and Quantum gold ETFs reported 12 per cent and 44 per cent increase in holdings in the period.

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