Golden times in 2016: Yellow metal outperforms other asset classes

The surge in gold inflows in 2016 is epitomized by the fact that SPDR Gold Shares, the world’s largest bullion exchange-traded fund, attracted US$ 4.55 billion of new money in 2016, the most among all US-listed ETFs. Thanks to the global as well as domestic market momentum, NSE Gold ETFs posted impressive gains.

Mar 03, 2016 06:03 IST India Infoline News Service Gaurang Damor |

The current crisis in equities and commodities has staged a robust comeback for the safe haven, gold. In 2016 so far, investment in gold has been the highest among other investment / asset class such as equities and crude oil.
 
The surge in gold inflows in 2016 is epitomized by the fact that SPDR Gold Shares, the world’s largest bullion exchange-traded fund, attracted US$ 4.55 billion of new money in 2016, the most among all US-listed ETFs. Thanks to the global as well as domestic market momentum, NSE Gold ETFs posted impressive gains.

The scene last year was contrary when investors showed less interest in the yellow metal as the stock markets were offering hefty returns. But this year, Gold has offered the highest return in the current year, in sharp contrast to the rapidly prevailing pessimism in equities and other investment tools with recovery nowhere in sight.

Gold Vs Others

In the international markets price of gold at Commex has shop up 16.45% to US$ 1,234/ t oz in 2016 so far. Buoyed by the global cues and increasing demand as a safe mean of investment, gold price in domestic markets too have surged over 18% to nearly Rs. 29,535 per 10 gm for 24-carat gold, from about Rs. 24,950 per 10 gm on December 31, 2015. The equities, on the other hand, offer negative return with Sensex falling 7.17% in 2016 so far. Similarly, crude oil price have been reeling under pressure with worsening demand-supply equation. Crude oil price has fallen by 8.69% in 2016.

Glittering Gold ETFs Steal the Show

Subdued stock markets have adversely impacted mutual funds. But, Gold Exchange Traded Funds (ETFs) have emerged star performers. As compared to the return of 18% in spot price of 24-carat gold in India, Gold ETFs like Axis Gold and Religare Gold offer a hefty return of 19.47% and 19.10% respectively in 2016 so far.
 
Return in Gold ETFs in 2016 so far
ETF 31-Dec-15 2-Mar-16 %
Axis Gold 2364.42 2825 19.47
Religare  2174.6 2590 19.10
Reliance  2209.55 2569.95 16.31
Goldman Sasch  2279.25 2610.7 14.54
UTI Gold 2271.3 2599 14.42
Kotak Gold  225.5 257.5 14.19
HDFC Gold  2358.3 2685 13.85
Birla Sun Life Gold 2390 2714.45 13.57
Quantum Gold  1148.6 1303.15 13.45
IDBI  2363 2674 13.16

Gems & Jewellery Stocks down
 
Though gold, in a physical form or as an ETF, has been offering impressive return on investment (RoI), barring a few, shares of gems & jewellery companies have disappointed investors big time.
 
Performance of Gems & Jewellery stocks in 2016
Stock 31-Dec-15 2-Mar-16 %
Alankit 62.2 98.1 57.71
Orosil Smiths 21 25.1 19.52
Rajesh Exports 682.05 705.25 3.40
Swarnasarita 25.9 25.05 -3.28
PC Jeweller 391.25 365.25 -6.64
Shrenuj and Co 13.35 11.99 -10.18
Renaissance Jewel 145.8 129.6 -11.11
Golkunda Diamond 22.8 20 -12.28
Goldiam Inter 55.3 45.65 -17.45
Goenka Diamond 1.77 1.36 -23.16
Gitanjali Gems 41.4 31.5 -23.91
Shree Ganesh 9.38 6.98 -25.58
Tara Jewels 59.5 42.25 -28.99
Lypsa Gems 148.4 94.7 -36.18
TBZ 91.3 48.55 -46.82

Improved Reserve position 
 
With the gold gaining momentum in the international as well as in Indian markets as a safe investment, India’s gold reserve has also been on the rise. In 2016, India’s total gold reserve has increased 2.47% to Rs. 1,201.20 billion as on week ended February 19, 2016 (US$ 17.96 billion). Similarly, India’s gold reserve position in the International Monetary Fund (IMF) has nearly doubled to US$ 2.59 billion.
 
Glittering prospects
 
With Union Finance Minister Arun Jaitley announced levying 1% excise duty on gems and jewellery in the Union Budget 2016, the sector has been pushed on a backfoot. However, this might not have much impact in the gold prices as the amount of safety it offers is better than equities and commodities, at least at present. Earlier, too, the government had made it mandatory to submit PAN card on purchase of gold more than Rs. 2 lk, but such move of the government also could not restrict buying in gold as safe investment. Amid, increasing volatility in equities, commodities and currencies, gold prices are expected to see further surge. 

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