An Empirical Study on Performance of Gold ETFs in India - Post Crash Period

Abstract

India being gold-centric, investors and coporates moved from buying and saving concept of gold to Investment and returns concept, a paradigm shift that brought forth many investment options in gold too. With booming capital market mitigating risk and maximizing returns became greatest challenge for any investment option. Mutual funds couldn’t live up to this challenge, thus new option, exchange traded funds (ETF) evolved, as underlying asset was Index, instead of single asset. As ETF’s fared well at bourses Gold ETF’s were also launched by large firms and were listed on stock exchange of India. Against this backdrop, the current study aims to study the performance of gold ETFs for the last five years (post-crash period) and also tries to evaluate the relationship of gold ETF’s to spot Gold prices and gold ETF’s to Nifty by using regression and correlation techniques. Out of the five gold ETFs selected in the study, GOLDSHARE is found to be more correlated to the spot gold price followed by GOLDBEES. The study also finds that the relationship of gold ETF’s to Nifty is inverse, meaning that as Nifty decreases gold ETF’s perform better, which is a unique phenomenon observed mostly in India.

Keywords: Exchange Traded Funds, gold ETF’s, Nifty 50, performance of gold ETF’s and spot gold prices.