Should You Redeem Or Invest In Gold ETFs?

The gold rush, after a long time, has stumbled with prices cooling down and spreading panic amongst investors. The direct impact is also seen on Gold Exchange Traded Funds (Gold ETFs). The net inflow in Gold ETFs has turned negative for the months of February and April. The performances of the funds in this category have also turned negative.

And investors are perplexed not knowing whether this is the time to redeem from the funds and book profits or is it the time to enter and invest. The answer needs an analysis of the situation.

Gold prices from Rs. 33,000 in 2011 have come down to Rs. 25,500 in recent times. Assets under Management (AUM) have grown to Rs. 11,648 crore in March 2013 from Rs. 9,886 crore in the previous year. This is about 18% growth over a year.

However, the net inflow from Gold ETFs has reduced in recent times. Except, the months of May, June and July in 2012, the positive momentum was continued. Over the year, the AUM increased, but from October it received marginally higher investments. The net inflow in October increased by Rs. 683 crore, in November Rs 270 crore, in December Rs 474 crore and in January Rs 81 crore.

In the months of February and March, the net inflow was in negative zone with Rs 8 crore and Rs 87 crore respectively. The inflow has outperformed outflow on most occasions. The market analysts predict of further fall in the gold prices in the near future and gold imports are also likely to reduce by about 25%.
Having already seen the downtrend, it is certainly not a time for redemption from Gold ETFs. For new investments, the time is expected to remain good for some more months. Albeit, the outlook of investors should be that of a broader horizon as gold has always been an investment worth bankable.

MF UPDATE
SBI MF has revised the exit load structure under SBI Magnum Income Fund – Floating Rate Plan – Saving Plus Bond Plan. Accordingly, a load of 0.15% will be charged if redeemed within 3 business days from the date of allotment and nil for exit after 3 business days from the date of allotment. The revised exit load structure will be effective from 15th April 2013.

BNP Paribas MF has launched a new fund namely, BNP Paribas Government Securities Fund, an open ended debt scheme. The face value of the scheme is Rs. 10 per unit. The new issue will be open for subscription from 18th April 2013 and closes on 29th April 2013. The investment objective of the scheme is to seek to generate income and capital appreciation by investing in a portfolio of government securities of various maturities issued by Central and State Government. The scheme would allocate 65% to 100% of assets in government securities issued by Central / State government and Treasury Bills with low to medium risk profile. On the other hand, it would allocate upto 35% of assets in Reverse repos in Government Securities and CBLO. The performance of the scheme will be benchmarked against I-Sec Composite Gilt Index. The fund will be managed by Mr. Puneet Pal.

ING MF has revised the exit load structure under ING Treasury Advantage Fund. Accordingly, the revised exit load will be nil. At present, 1% exit load was charged if units are redeemed within 6 months from the allotment date. The revised exit load structure will be effective from 16th April 2013.

L&T MF has revised the exit load structure under L&T Income Opportunities Fund. Accordingly, a load of 2%  if redeemed within 1 year, 1% if redeemed after 1 year but before 2 years from the date of allotment. At present, 0.25% exit load was charged if redeemed within 30 days from the date of allotment. The revised exit load structure will be effective from 16 April 2013.

Tata MF has revised the exit load structure under Tata Short-term Bond Fund. Accordingly, a load of 0.50% will be charged if redeemed before expiry of 9 months from the date of allotment. At present, 0.50% exit load was charged if units are redeemed before expiry of 180 days from the allotment date. The revised exit load structure will be effective from 18th April 2013.

SBI MF has revised the exit load structure under SBI Magnum Instacash Liquid Floater Plan. Accordingly, the revised exit load will be nil. At present, 0.25% exit load was charged if units are redeemed within 30 days months from the allotment date. The revised exit load structure will be effective from 18th April 2013.

JP Morgan MF has revised the exit load structure under JP Morgan India Active Bond Fund. Accordingly, a load of 1% will be charged if redeemed within 18 months from the date of allotment. At present, 1.50% exit load was charged if units are redeemed within 12 months from the allotment date. The revised exit load structure will be effective from 17th April 2013.

BEST PERFORMING FUNDS

*Note:- Returns less than one year are absolute returns and returns more than 1 year are compound annualised. NAV as on April 19, 2013.