 "Gold ETFs dip for 3rd month as prices fall")
Holdings in exchange-traded funds, or ETFs, declined 9.2 per cent to Rs 9,610 crore ($1.6 billion) as of June 30 from a month earlier, the Association of Mutual Funds in India (Amfi) said on its website, without giving data on volume. The value of assets has lost 20 per cent since reaching a record Rs 12,060 crore in January, association data showed. Gold fell 4.5 per cent in rupee terms in June, falling for a 10th month.
Global gold-backed exchange-traded products have fallen below 2,000 tonnes for the first time since May 2010 after bullion slumped on expectations that the US Federal Reserve would reduce stimulus measures. Gold in dollars slid 23 per cent last quarter, the biggest loss since at least 1920, as some investors lost faith in the metal as a store of value on signs of an improving US economy.
"Indians are price-sensitive, so they shy away from the market in times of higher volatility," Chirag Mehta, fund manager at Quantum Asset Management Co, said by phone. "Demand in the ETF market moves in line with demand in the physical market and we should see buying coming in during the festival season after the seasonally slack months of June and July."
Reliance suspension
Bullion futures in Mumbai slumped to Rs 24,830 per 10g on June 28, the lowest level since August 2011. The contract for delivery in August climbed 0.6 per cent to Rs 26,156 on the Multi Commodity Exchange of India, while spot gold in London rose 0.2 per cent to $1,253.62 an ounce.
Reliance Capital Ltd, the financial services company owned by billionaire Anil Ambani, last month stopped sales of gold and halted new subscriptions in its gold savings fund.
Jewellers and bullion dealers have halted sales of coins and bars to retail investors to support government efforts to narrow the record current-account deficit.
India has increased import taxes and tightened financing norms in a bid to cut gold purchases and contain the deficit. Finance Minister Palaniappan Chidambaram last month appealed to Indians to "resist the temptation to buy gold," saying reduced imports might help tackle the current-account gap and the weakness in the rupee. The currency touched a record low of 61.2125 a dollar on July 8.
The current account deficit, the broadest measure of trade, tracking goods, services and investment income, widened to $87.8 billion, or 4.8 per cent of the gross domestic product, from $78.2 billion in 2011-2012, according to official data. The deficit is the biggest risk to the $1.9 trillion economy, according to the central bank.
Net redemptions from gold ETFs were Rs 206 crore in June, according to data from the mutual funds' association. India, which allowed trading in gold ETFs in 2007, currently has 14 such funds.