Gold ETF Is Taking Main-Stage Due To Strong Interest From Investors & Retail Alike: Gold Council

Summary

In this interview, Sachin Janis, Managing Director at the World Gold Council, discusses the growing role of gold ETFs in India. He touches on recent regulatory developments, including Sebi's proposal to link ETF prices to domestic spot prices and the potential for insurance companies to invest in gold ETFs. Janis also shares insights on gold's investment value, its stability amid geopolitical uncertainty, and the future of jewelry consumption in India. He anticipates steady growth in gold interest, particularly with new ETF redemption options and a more engaged consumer base.

Takeaways

• 😀 Sebi has released a consultation paper suggesting that ETF prices should be linked to spot prices in the Indian market rather than the LBMA.
• 😀 The consultation by Sebi aims to promote greater transparency, confidence, and reduce discrepancies in the gold market.
• 😀 The growth of ETFs is expected to be significant in the future, both in terms of assets under management (AUM) and investor interest, particularly among Indian consumers.
• 😀 The Indian insurance regulator is considering allowing insurance companies to invest in gold ETFs, which could lead to more diversification in investment portfolios.
• 😀 Gold is seen as a tool for portfolio diversification, especially during uncertain times like the 2008 financial crisis and the COVID-19 pandemic.
• 😀 The potential for redeeming ETFs for jewelry is actively being explored, with a pilot program expected to launch in Q4.
• 😀 Gold has performed exceptionally well in the first half of the year, with a return of 26%, driven by a weaker dollar and strong demand from central banks.
• 😀 Three possible scenarios for gold's performance in the second half of the year include a steady increase (0-5%), a larger rise if volatility and geopolitical risks persist (10-15%), or a slight decline (10-12%) if the global situation normalizes.
• 😀 Despite a drop in jewelry volume in the first two quarters, consumer interest in gold remains high, with many buyers waiting for price stability before making purchases.
• 😀 The demand for gold jewelry is expected to increase in the second half of the year, especially as lightweight and affordable jewelry options become more popular.
• 😀 As an investor, Sachin Janis views gold as a long-term investment and sees current gold prices as a stable entry point for portfolio diversification.

Q & A

What was the primary purpose of Sebi's consultation paper on ETFs?

Sebi's consultation paper suggested that ETF prices should be linked to the spot prices in the Indian markets rather than the LBMA, aiming to increase transparency, build investor confidence, and ensure alignment with the domestic market.

How does Sachin Janis view Sebi's initiative on ETFs?

Sachin Janis welcomes Sebi's initiative, recognizing it as a step toward enhancing transparency and building confidence in the ETF market. He believes it will support the long-term growth of ETFs in India.

What are the main benefits of gold for investors, according to Sachin Janis?

Sachin highlights gold as a valuable diversification tool, enhancing portfolio health by providing liquidity, especially during economic uncertainties such as the 2008 financial crisis or the COVID-19 pandemic.

What is Sachin Janis's perspective on allowing insurance companies to invest in gold ETFs?

Sachin supports the idea of allowing insurance companies to invest in gold ETFs, believing it would contribute to long-term portfolio health for Indian investors and diversify their holdings.

What progress has been made regarding ETF redemption into jewelry?

Sachin mentions that work is underway to allow ETF redemptions in the jewelry market. A pilot project with select partners is expected to launch by the fourth quarter, aiming to increase awareness and usage of ETFs among consumers.

How does Sachin Janis predict the gold market will perform in the second half of the year?

Sachin outlines three potential scenarios for the second half of the year: a stable gold price with a 0-5% increase, a scenario with increased volatility and geopolitical risks, leading to a 10-15% increase, or a return to more normalized conditions with a slight decrease in price.

What has been the impact of gold price fluctuations on jewelry demand in India?

While jewelry volumes have decreased in the first two quarters of the year, consumer interest in gold remains strong, particularly as prices stabilize. There is growing interest in affordable, lightweight, and lifestyle-oriented jewelry, which is expected to drive demand in the second half of the year.

How does Sachin Janis personally view gold as part of an investment portfolio?

Sachin considers gold a long-term investment and maintains a small but strategic allocation in his portfolio. He believes it offers stability and value over the long run.

What does Sachin believe about the future of gold prices?

Sachin believes gold prices will stabilize in the near future, with potential upward movement but no drastic changes. He sees gold as a reliable investment option despite market volatility.

How does the Indian consumer's relationship with gold jewelry evolve during price fluctuations?

As gold prices rise, Indian consumers tend to wait for stability before making purchases. However, interest in gold jewelry remains high, with demand shifting towards more affordable and creative pieces, especially in a stable price environment.