Although, there has been some redemption of gold exchange-traded funds (ETF), Sanjiv Shah of Goldman Sachs AMC tells CNBC-TV18, the total amount that has gone out is about Rs 200 crore, whereas the ETF size is more than Rs 10,000 crore. Hence, it is a marginal amount and he does not see any significant pressure on gold ETFs.
Shah further adds that gold ETFs are the only option to invest in non-rupee assets for an Indian investor who wants to play in the currency market. The best bet for him is to buy gold either in the physical form or as ETFs, as the golden metal acts as a very good hedge to invest in a non-rupee asset.
Below is the edited transcript of the interview on CNBC-TV18. Also watch the accompanying video.
Q: What is happening with gold, we are seeing quite a bit of redemption from gold exchange-traded funds (ETF) and withdrawal of money. Just profit taking or something else?
A: If you look at the total amount which has gone out is about Rs 200 crore and given that the ETF size is more than Rs10,000 crore now, I would think it is marginal, not even marginal for that matter.
You would see the gold prices and the rupee appreciating quite a lot because of which the gold ETF net asset value (NAVs) have been pretty high. You would find some people book profits. But I won't even call it anywhere close to huge amount of redemptions.
Q: Even so it's more than what you have seen in the past. What is feeding it - some concern about gold, the fact that it's run up so much in the last year?
A: You got to look at it from the perspective that when we started off the gold ETF. It started off at Rs 100 crore. Now it's up Rs 10,000 crore plus. Obviously, the size has increased. On a corpus of Rs 100 crore, if Rs 2 crore redemption happens, the size is very small.
Similarly, if you look at Rs 10,000 crore, Rs 220 crore is exactly the same amount. The other side of it is basically to be honest, there has been a huge appreciation of the rupee and