India Gold ETFs Experience Record Inflows Amid Global Price Surge

India's gold exchange-traded funds (ETFs) have witnessed unprecedented inflows in recent months, driven by a surge in global gold prices and increasing investor demand for safe-haven assets. September 2025 marked a historic milestone, with Indian gold ETFs attracting \$902 million in net inflows, a staggering 285% increase from August's \$232 million. This surge has propelled India to the top spot in Asia for gold ETF inflows and fourth globally, behind the US, the UK, and Switzerland.

Factors Driving the Inflows

Several factors have contributed to this surge in investor interest.

• Global Economic Uncertainty: Heightened concerns over a potential US government shutdown, geopolitical tensions (including the Russia-Ukraine war and conflicts in the Middle East), and global growth worries have pushed investors towards gold as a safe haven. Gold is traditionally considered a reliable store of value during times of instability.
• Surging Gold Prices: Gold prices have rallied sharply, reaching record highs in October 2025. Spot gold crossed \$4,000 per ounce, fueled by safe-haven demand and a weaker dollar. This price appreciation has further incentivized investors to increase their exposure to gold.
• Monetary Policy Expectations: Expectations that the US Federal Reserve might move towards further rate cuts have made non-yielding assets like gold more attractive. Lower interest rates typically boost gold demand as the opportunity cost of holding gold decreases compared to interest-bearing assets.
• Currency Volatility: Weakness in the US dollar and other Asian currencies has encouraged defensive positioning in gold. A weaker dollar makes gold cheaper for foreign investors, increasing demand.
• Declining Domestic Stocks: A decline in domestic stock performance is contributing to investors seeking alternative safe havens.
• Festive Season Demand: The approaching Diwali festival is also expected to keep gold prices bullish, as the metal is considered auspicious for gifting and investment during this time.

Impact on the Indian Market

The record inflows into gold ETFs have had a significant impact on the Indian market.

• Record AUM: Assets under management (AUM) in Indian gold ETFs have reached a record \$10 billion. This reflects the increasing investor confidence in gold as a secure investment option.
• Increased Gold Imports: Higher inflows into gold ETFs are likely to lead to increased gold imports, potentially widening India's trade deficit and putting pressure on the rupee.
• Shift in Investment Preference: Traditionally, Indians have preferred physical gold in the form of jewelry, coins, and bars. However, there is a growing shift towards gold ETFs, particularly among urban investors, due to their convenience, liquidity, and cost-effectiveness.
• Outperformance Compared to Equities: Gold ETFs have outperformed the Nifty 50 benchmark index over the past few years, making them an attractive option for wealth preservation and growth.

Global Context

India is not alone in experiencing increased interest in gold ETFs. Globally, gold ETFs recorded their largest monthly inflow in September, resulting in the strongest quarter on record. This trend is driven by similar factors, including economic uncertainty, geopolitical tensions, and expectations of lower interest rates.

Individual Gold ETFs

Several gold ETFs in India have delivered strong returns. Some of the top performers include:

• LIC MF Gold ETF
• UTI Gold ETF
• Nippon India ETF Gold BeES
• HDFC Gold ETF
• SBI Gold ETF
• ICICI Prudential Gold ETF
• Kotak Gold ETF
• Aditya BSL Gold ETF

Advantages of Investing in Gold ETFs

Gold ETFs offer several advantages over physical gold:

• Liquidity: Gold ETFs are highly liquid and can be easily bought or sold on stock exchanges.
• Cost-Effectiveness: Gold ETFs have lower expense ratios compared to physical gold investments.
• Security: Gold ETFs are backed by physical gold of high purity, stored in secure vaults.
• Diversification: Gold ETFs can help diversify an investment portfolio and reduce overall risk.
• Hedge Against Inflation: Gold is known to retain value during periods of high inflation.

Conclusion

India's gold ETFs have demonstrated exceptional strength, posting record monthly and year-to-date inflows. The surge in inflows reflects a growing investor appetite for gold as a safe-haven asset amid uncertain market conditions. As global economic and political uncertainties persist, gold is likely to remain a favored investment option, potentially driving further growth in the Indian gold ETF market.