Gold ETFs down up to 14% from peak. Is the best of yellow metal bull run over?

After a strong rally that saw gold prices hitting record highs earlier this year, Gold Exchange Traded Funds ( ETFs) have corrected up to 14% from their recent peaks, prompting investors to question whether the bull run in the yellow metal is over or not.

An analysis of data showed that SBI Gold ETF corrected the most by around 14% from its 52-week high level, followed by 360 One Gold ETF and Tata Gold ETF, which are down by around 12% each from their 52-week high level.

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Around seven gold-based ETFs were down by 7% from their peak which includes LIC MF Gold ETF, Groww Gold ETF, Mirae Asset Gold ETF, HDFC Gold ETF, and Edelweiss Gold ETF.

Kotak Gold ETF and DSP Gold ETF were down by 6% each from their peak, and lastly, Zerodha Gold ETF dropped by 5% from its peak.

An expert believes that during uncertain periods, gold performs well as investors consider it a safe haven, and the past five years have seen a lot of volatility, starting with the pandemic and then, the geopolitical tensions concerning Russia-Ukraine, Israel-Hamas, and now India and Pakistan across the border have firmly pushed prices upward.

“They would usually be normalised upon the diffusion of those fears and the stabilisation of global sentiment. Prices are now dipping simply owing to this releasing-off effect after a strong rally, which for some time had even outshined long-term equity returns.” commented Rajesh Minocha, a Certified Financial Planner (CFP), Founder of Financial Radiance.

According to a report by ET, on Wednesday, gold and silver settled on a weak note in the domestic and international markets. Gold and silver prices were unable to hold their previous sessions gain and plunged again amid easing safe-haven demand due to US-China trade negotiations and major risk aversion in the global financial markets.

The U.S. and China trade negotiations changed bullion markets sentiments and traders and investors are unwinding their long positions and booking profits, the report further added.

In the last nine months, gold ETFs have offered upto 32.37% return with UTI Gold ETF being the topper, followed by Invesco India Gold ETF which has offered 31.68% return.

Nippon India ETF Gold BeES, the largest gold ETF, offered 31.24% return. Edelweiss Gold ETF gave the lowest return of around 31.08% return.

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These ETFs gave upto 28.69% return in the last one year with UTI Gold ETF being the topper. LIC MF Gold ETF gave the lowest return of around 27.94% in the last one year.

The expert firmly mentions that the recent dip doesn't mean the rally has necessarily completely ended-the gold remains topical as a long-term hedge and it is one investment that should be in a diversified portfolio rather than a core growth asset.

“One option is the ETFs, but investors can also take the flexible route like multi-asset funds-that adjust allocational emphasis based on market perception. Overall it can constitute about 8 to 10% of the total portfolio,” Minocha added.

Gold ETFs are exchange-traded funds that track the price of physical gold. Each unit of a Gold ETF is backed by a specific quantity of gold, usually equivalent to one gram. They are listed on stock exchanges, and you need a demat and trading account to buy and sell them.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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