Sebi permits gold futures in ETFs. India's market regulator has approved a significant change allowing gold ETFs to allocate up to 95 percent of assets into gold futures alongside physical gold. This shift grants fund managers greater flexibility to manage sudden inflows and delays in acquiring physical gold, reducing cash drag and improving price tracking. Gold futures are financial contracts tied to gold prices rather than physical metal holdings. While this change offers benefits like lower tracking errors and quicker market responsiveness, it introduces costs through regular rollovers and potential price discrepancies between futures and spot gold. Experts clarify this is a backup mechanism, not a complete shift away from physical gold, as most ETFs will continue holding primarily physical assets.
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