Gold ETFs and Diwali

November 13th at 8:59am by Tom Lydon

Gold exchange traded funds have been trading higher on safe haven demand and inflationary fears, and now we are heading into the main season for gold in India, one of the largest consumers of the precious metal.

India’s two national stock exchanges held a special trading session just for gold ETFs to begin the Hindu festival of Dhanteras, the first day of the five-day Diwali festival and a traditionally auspicious day to buy gold, reports Khushita Vasant for the Wall Street Journal. [End of Year Outlook for Gold, Commodity ETFs]

Jigar Pandit, associate vice president for commodities and currencies at Mumbai brokerage Sharekhan, notes that many waited until Sunday to make their investments, including himself. [Obama Victory Seen Bullish for Gold ETFs]

In prior years, Indian stock exchange have opened during Diwali since it is thought to bring good fortune to business conducted on that day, but the day-long gold trading session is a new addition.

India is one of the largest gold-importing countries in the world. The physical demand for gold is mainly for jewelry. However, with the advent of ETFs and the rising gold prices, more Indians have used gold as an investment and hedge against inflation.

According to the India’s National Stock Exchange, India-listed gold ETFs had $2 billion in assets as of September, or 40% higher year-over-year.

For 2012, industry officials expect gold imports to drop by 30% to 40% from a record 969 tons in 2011 after the government doubled the import duty on gold to 4% and the weaker Indian rupee made dollar-denominated gold purchases more costly.

In India, gold ETF trading volume soared Sunday during the special trading session, The Economic Times reports.

Meanwhile, U.S. investors can trade on the pick up in demand with U.S.-listed ETFs:

  • SPDR Gold Shares ETF (NYSEArca: GLD)
  • iShares COMEX Gold Trust ETF (NYSEArca: IAU)
  • ETFS Physical Swiss Gold Shares ETF (NYSEArca: SGOL)
  • Powershares DB Gold Fund ETF (NYSEArca: DGL)
  • ETFS Physical Asian Gold Shares ETF (NYSEArca: AGOL)

For more information on gold, visit our gold category.

Max Chen contributed to this article.

Full disclosure: Tom Lydon’s clients own GLD.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.