Investors poured a record amount into gold exchange-traded funds (ETFs) in 2025, with net inflows reaching ₹42,961 crore — nearly four times the ₹11,226 crore that entered these funds in 2024. The sharp jump reflects renewed appetite for gold as a portfolio diversifier and safe-haven asset amid changing market conditions.
What the numbers tell us
The surge in ETF inflows signals a significant shift in investor preference toward paper gold. While physical gold demand remains important in many markets, gold ETFs are becoming a favored route for those who want exposure without handling, storage, or making charges. The inflows in 2025 represent not only larger contributions from institutional investors but also growing participation from retail investors who find ETFs convenient and cost-efficient.
Key drivers behind the surge
- Macro uncertainty: Periods of geopolitical tension and uneven economic growth tend to boost demand for assets perceived as safe stores of value. Gold often benefits from such flows.
- Inflation and interest-rate dynamics: When inflation concerns rise and real yields are low or negative, gold becomes more attractive as an inflation hedge.
- Ease of access: Buying gold ETFs through broker platforms or systematic investment plans (SIPs) has lowered barriers for small investors who prefer electronic ownership over physical bullion.
- Cost and transparency: Compared with buying physical gold, ETFs eliminate making charges and offer clearer tracking of market prices, making them appealing to many investors.
- Portfolio diversification: Investors increasingly use gold ETFs to balance equity and bond exposures, especially in volatile markets.
What this means for the market
Large inflows into gold ETFs can influence both local demand dynamics and broader market sentiment. Higher ETF volumes may support gold prices by increasing investment demand, even if jewellery and industrial demand remain steady or fluctuate. For fund managers, growing assets under management (AUM) improve liquidity and lower expense ratios over time, which can further attract investors.
Impact on investors
- Better liquidity: Larger ETF volumes generally make it easier to buy and sell units without wide bid-ask spreads.
- Lower costs possible: Rising AUM often leads to more competitive expense ratios across funds.
- Portfolio utility: Gold ETFs provide a convenient way to add non-correlated exposure to a diversified portfolio.
Risks and things to watch
Despite the strong inflows, gold ETFs carry risks and trade-offs that investors should consider:
- Price volatility: Gold can be volatile in the short term, so investors should be prepared for price swings.
- No physical ownership: ETF units represent a claim on gold but do not grant ownership of physical bullion. For those wanting jewellery or coins, ETFs are not a substitute.
- Tracking and expense considerations: Funds may have tracking error and management fees that affect returns. Choosing lower-cost funds with good track records is important.
- Tax treatment: In many jurisdictions, tax rules for gold ETFs differ from equities. For example, long-term capital gains treatment typically applies to units held beyond a specified holding period; investors should check current local tax rules before investing.
Practical tips for investors
- Decide your allocation: Use gold as a hedge or ballast rather than trying to time market peaks. Common allocation ranges are modest portions of a diversified portfolio.
- Choose low-cost, liquid ETFs: Check expense ratios, AUM, and average daily volume when selecting a fund.
- Consider a long-term horizon: Gold’s role as a portfolio diversifier often works best over multi-year periods.
- Use SIPs for rupee-cost averaging: Systematic investments can reduce timing risk and smooth entry points.
- Review tax implications: Understand how gains on gold ETFs are taxed in your jurisdiction and plan accordingly.
Looking ahead
The quadrupling of inflows from 2024 to 2025 shows that investors are increasingly comfortable using ETFs to gain exposure to gold. Whether this momentum continues will depend on macroeconomic trends, interest-rate moves, and investor sentiment. For now, the trend highlights a clear shift toward paper-based gold investments, driven by convenience, cost efficiency, and portfolio utility.
For investors considering gold ETFs, the fundamentals are straightforward: know why you want gold in your portfolio, choose funds carefully, and maintain a time horizon that matches your financial goals.