A Halt to Gold ETF Investments: Seven Funds, Including ICICI and Kotak, Stop New Entries—What Will Be the Impact on Investors?
The festive season is in full swing; markets are buzzing with the spirit of Dhanteras and Diwali, and everyone is looking to add some 'gold' to their portfolios. Amidst this, major fund houses—including ICICI Prudential, Kotak, Axis, Tata, Aditya Birla Sun Life, DSP, and Invesco—have placed a temporary suspension on new investments into their Gold Exchange-Traded Fund (ETF) 'Fund of Funds' (FoF) schemes.
What is covered by this suspension, and what remains open?
Effective October 16, these fund houses have temporarily halted new lump-sum investments, 'switch-ins,' new SIP (Systematic Investment Plan) registrations, and STP (Systematic Transfer Plan) registrations for these Gold FoFs. Some fund houses have also suspended 'top-ups.' Existing SIPs or STPs will continue as usual, with installments being processed as scheduled. Furthermore, there are no restrictions on redemptions, 'switch-outs,' or SWPs (Systematic Withdrawal Plans). The fund houses have not yet specified when these investment channels will reopen.
Why was this sudden move taken?
While the fund houses have not provided an official reason in their notices, the underlying economic factors are clear:
Pressure on the Rupee: The rupee has weakened against the US dollar this year, driven largely by high oil prices and sell-offs by foreign investors. Gold remains one of India’s largest import categories.
Record-breaking Inflows: According to AMFI, Gold ETFs saw a massive inflow of ₹4,450.61 crore in September 2024—a 71% increase compared to August. In the first nine months of the year alone, total inflows reached ₹45,925 crore, already surpassing the total for the entire year of 2023 (₹42,961 crore). Due to the government’s decision to increase the import duty on gold and silver to 15% this year, combined with surging demand, fund houses have been compelled to take this precautionary measure.
What should investors do now?
If you have an ongoing SIP, you do not need to take any action; your process will continue as usual.
If you wish to make a new investment, the Fund of Funds (FoF) route is no longer available to you. However, you still have the option to purchase Gold ETFs directly through a stock exchange, which requires a demat account.
Do keep in mind that increased demand on the exchange can sometimes cause ETF units to trade at a premium to their actual value. Therefore, always check the 'Indicative NAV' on the AMC’s website before making a purchase.
Gold is currently going through a phase of volatility. Financial experts advise allocating only 10% to 15% of your total portfolio to gold. View it not as a means to generate high returns, but as a diversifier that helps safeguard your portfolio.
Disclaimer: This content has been sourced and edited from Amar Ujala. While we modified it for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.
