Politics · India Bureau
Gold fund-of-funds halt new investments as ETF demand surges
Fund houses have suspended fresh investments in gold fund-of-funds as exchange-traded fund inflows hit a six-month peak. The move reflects growing concerns over India's gold import bill and its impact on the current account deficit.
LSN India ·
Asset managers have paused new investment commitments in gold fund-of-funds as investor appetite for gold exchange-traded funds rebounds sharply. The shift marks a notable divergence in gold investment vehicles, with ETF inflows accelerating to levels not seen since early 2024.
The pullback on fund-of-fund investments appears driven by macroeconomic considerations. Gold imports represent a significant drain on India's foreign exchange reserves and contribute materially to the country's current account deficit, a key concern for policymakers monitoring external stability.
The preference for ETFs over fund-of-funds reflects investor appetite for more direct exposure to gold prices and potentially lower cost structures. ETF flows have strengthened despite—or perhaps because of—the broader economic headwinds that prompted the fund house restrictions.
The divergence underscores a recalibration in how domestic investors are accessing gold as an asset class. While overall gold demand remains supported by traditional buying patterns and hedging interest, the channel through which capital flows into the commodity is shifting noticeably.