Despite this drop in traditional jewellery demand, Dhawan highlighted a shifting dynamic in the gold market, with investment demand, particularly through exchange-traded funds (ETFs), gaining momentum.
“Of the total assets under management in mutual funds, gold holdings are just 1%,” Dhawan said.
Dhawan stated that gold rallies are driven by different factors at different times. The current surge, he explained, is distinct, moving away from previous reliance on ETF flows and COVID-related hedging. Instead, it’s increasingly influenced by central bank buying and, notably, a resurgence in investment demand, particularly through ETFs.
“Indian investors are benefiting from the virtues of gold ETFs, the liquidity and being very well regulated, and being fully backed by physical gold,” Dhawan said.
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He also stated the convenience of digital transactions, which further enhances the appeal of ETFs. While physical gold demand still dominates in India and China, ETF flows are picking up, and Dhawan sees potential for further growth.
Despite gold’s recent strong performance, Dhawan emphasised that it remains an under-allocated asset class in global portfolios. He suggested that increased currency volatility, particularly stemming from US policies, and uncertainty in risk assets could drive further interest and allocation to gold, potentially pushing it beyond its historically low portfolio percentages.
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For the entire interview, watch the accompanying video
(Edited by : Unnikrishnan)