UTI Gold ETF tanks on lack of institutional support

UTI Gold ETF (Gold Share) is the biggest loser in the last one year with a cut of 14.8%. The second biggest loser – ICICI Prudential Gold ETF – lost only 6.04% during the same period. Similar trend is visible for the one-month holding period as well. While Gold Share lost 7.46% in the last one month, the second biggest loser – Canara Robeco Gold ETF – lost only 3.33%.

To get a clearer picture, we compared Gold Share with Goldman Sachs Gold ETF (Gold BEES), the biggest gold ETF and also the one with the highest turnover. UTI Gold Share’s NAV continues to be at a small premium to the NAV of Gold BEES. However, the Gold Share market price has tanked in the last 3-4 months thereby increasing the gap between them to 270, around 10%. What is the problem with Gold Share?

First, all gold ETFs appoint market makers to provide liquidity and stability to the counter and it seems the Gold Share's market makers have not met with much success. Second, most mutual funds have open-ended fund of funds (FoFs) that invests in their own gold ETFs. While these FoFs are acting as the additional market maker for other gold ETFs, it is not happening for Gold Share because UTI doesn’t have an FoF that invests in its Gold ETF.