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By Mike Maharre
Indians have a strong relationship for gold and silver. It is traditionally expressed in demand for gold and silver jewelry with bar and coins. But in the last year, there has been a tremendous increase in gold and silver exchange-traded funds (ETFs).
In the simplest words, an ETF represents a basket of investment that trades on the market as a single unit. For example, a Gold ETF is supported by a trust company that holds an ownership and stored metal by the trust. In most cases, investing in ETF does not entrust you for any amount of physical gold or silver. (Exceptions.) You are a part of ETF, not metal.
ETF is a convenient way for investors to play gold and silver markets, but being the owner of ETF shares is not the same as physical gold or silver.
Gold flows in ETFs can greatly affect the global gold market by pushing the overall demand.
2024 gold and silver demand in India
Even with the price of both gold and silver at record levels, the Indian demand for both metals has so far been strong in 2024.
The Government of India cut taxes on more than half of gold and silver imports in July, which reduced the fee to reduce by 15 percent. The move initially reduced prices by about 6 percent and increased record gold imports in August. Price decline increased the demand for both metals.
Despite the cut in import duty, gold and silver prices have gained strong benefits in the terms of the rupee. According to the focus of metals, gold has increased by 20 percent this year, touching 80,000/10G in this process. Silver prices have increased by 17 percent, briefly more than a psychologically significant Rs. 100,000/kg.
Indian buyers values are sensitive, and high prices have undoubtedly created some headwinds for retail demand, but according to the attention of metals, there are “prices” in rising prices.Fresh investment attracted amid hopes of increasing further price price,
The demand for gold bars and coins has increased by the first nine months of 2024 to an estimated 38 percent year-on-year 163 tonnes. This is the highest level since 2013.
Meanwhile, silver investment demand ranges from an estimated 15 percent to 1,766 tonnes. This is the second largest level since 2015.
Indian Gold ETFs enjoy resurrection
Gold and Silver ETF is a relatively new event in India. The first Indian Gold ETF was launched in 2007, and the first Silver Fund was built in January 2022.
Gold ETFs failed to attract meaningful flows initially. According to the focus of metals, it was due to two factors.
- Investor lack of awareness
- A priority for physical metal.
Indian Gold ETF holdings initially reached 40.8 tonnes in 2013. As the Great Recession faded in the rearview, the Tipid interest in ETFs decreased even more, with gold-supported fund holdings falling to just 14 tonnes in 2019.
The introduction of Sovereign Gold Bond (SGBS) in 2015 made a drag on ETF investment. The securities issued by the government are depicted in the gram of gold, but are not supported by the physical metal. However, they are guaranteed by the government and 2.5 percent yield is offered. They also have tax benefits.
According to the focus of metals, SGB attracted gold investment equal to 147 tonnes, which is coming after post-pandemic.
“To keep it in perspective, by March 2020, the Reserve Bank of India (RBI) released 37 installments of these bonds, but it only attracted 31 tons of gold. After March 2020, 30 trenches were issued, which were brought in 116 tonnes.”
The government did not release any SGB in February 2024, increasing the demand of ETF.
Positive feeling towards yellow metal also promoted gold ETF investment post-coord. Golding holding in Indian-based funds increased from 19.4 tonnes in March 2020 to 54.5 tonnes by October 2024. According to metals, “These flows are limited in terms of tons loads, various factors such as jumping in retail trading accounts, launch of multi-asset funds and different factors such as optimism.,
This year, the speed of gold has increased. Indian ETF holdings have increased 12 tons, the most profit since 2020.
Indian Silver ETF: A success story
India’s love affair with gold is famous, but Indians also have an intimacy for silver. According to the focus of metals, Indian investors have accumulated 17,000 tons Silver in the last 10 years and silver in the form of coins.
Indians not only see silver as a money shop, but they also see it as a strategic investment option. As the metal focuses, the white metal is “” is “”Strategic appeal, which is inspired by its inherent instability. This has attracted fresh investors in India, recently during the bull run they keep themselves in position for a possible price profit.,
Silver ETF located in India has experienced a significant increase since the first one to be launched 2 years ago. Silver Holdings exceeded 1,000 tonnes in August.
Silver ETF is now equal to about 40 percent of annual retail silver investment. This gold compared about 5 percent to ETFs.
According to the focus of metals, the price performance of silver with a lack of competitive products has inspired the development of silver ETF.
As focusing on metals, silver-supported ETFs also solve a practical problem.
“Given the size of silver bars, it can present a challenge for retail participants to store the metal. The issue was addressed with the launch of the ETP, where investors can catch silver as security in their trading account.”
looking ahead
The metal focus on both silver and gold ETFs in India to see the flow of metal.
“It reflects both more investment managers to be exposed to precious metals and recommending growing awareness between investors of precious metals ETP.
