They, however, argued that it would not be the end of the road for gold as an asset class and that the yellow metal is crucial for asset diverisification purpose, apart from the fact that nothing fundamentally has changed better for the global economy.
"Gold ETFs have seen redemption pressure in the last fiscal year in comparison to the 2007-2011 period. With a steep fall in gold prices, this pressure may continue. However, there is less possibility of huge redemption as gold as an asset class remains important for portfolio diversification," Himanshu Pandya, senior vice-president and head of products and communication at ICICI Prudential Asset Management Co. Ltd, told PTI today.
Gold prices hit a near 15-month low today in the country following reports of Cyprus being forced to sell its gold holding reserves. Other troubled EU nations like Italy, which has the fourth largest gold reserve holding, was also being forced to sell gold to bring its finances back to sails.
Gold prices have fallen to Rs 26,850 per 10 grams today from a high of over Rs 33,000 crore per 10 gram mid last year.
He also said investors should not expect super-normal profits from the gold ETF space as there is renewed faith in the dollar due to the recovery of the US economy.
On the possible rise in redemption pressures in the gold ETF space, IDBI MF chief executive Debasish Mallick said: "if gold continues to fall, there is a likelihood that investors will exit."
He, however, said nothing has fundamentally changed in the global markets for justifying such fall in the gold prices.
A fund manager from Quantum Mutual Fund said despite the falling prices, gold will remain crucial as an asset class for diversification.
"Gold ETFs comprise a very small amount out of the total pie of investment by domestic investors. So, there may not be high redemptions as investors with long-term outlook will stay invested in this asset class," Chirag Mehta, fund manager (commodities) at Quantum MF, said.
Mr Mehta also said the recent fall is a correction and may not continue as fundamentals have not changed significantly in the global economy.