Preference for jewelry impacts on Indian gold ETFs

Exchange traded fund activity in India is somewhat muted because gold buyers prefer jewelry, Reuters reports.

The country consumes around a fifth of the world's annual gold supply - equating to 800 tonnes - and it is reckoned that there is more of the precious metal in India than any other nation.

However, ETFs in the country have only attracted minimal investment since they launched three months ago.

An ETF launched in the US in 2004 attracted to investment worth 100 tonnes in a week; this compares to less than five tonnes on Indian ETFs.

Traditional investment in jewelry, bad timing and tight government regulations have all negatively impacted take-up.

"It has been launched at the wrong time when gold prices have started dipping," said Gnanasekhar Thiagarajan of Commtrendz Risk Management.

"Vibrant equity markets have also kept investors away from gold exchange traded funds."

The first Indian gold ETF was launched in March this year by Benchmark Asset Management Company.