Surging gold prices, escalating geopolitical tensions, increased purchases by global central banks and tariff-related uncertainties have drawn investors towards gold exchange-traded funds (ETFs), resulting in a record six-fold jump in inflows into the asset class during September.
Rising preference for gold as an investment option amid a lacklustre domestic stock market performance is also driving higher flows into gold ETF.
Inflows into gold ETFs rose 578.28 per cent, or six times to Rs 8,363.13 crore in September 2025, compared with Rs 1,232.99 crore in the same period last year, according to the latest data from the Association of Mutual Funds in India (AMFI). In September, net inflows rose 281.96 per cent on a month-on-month basis from Rs 2,189.51 crore in August.
Gold ETFs are the ETFs with gold as the underlying asset. It gives investors an option of holding gold electronically instead of physical gold. It is a safer option to hold the precious metal since there are no risks of theft or purity.
Macroeconomic concerns
“Escalating geopolitical tensions, global uncertainties and overall dynamic outlook seem to be boosting the safe-haven appeal of the bullion. Investors favour investing in gold ETFs due to liquidity, transparency, cost-effectiveness, and ease of trading compared to physical gold,” said Ashwini Kumar, Senior Vice President and Head Market Data, ICRA Analytics.
The attractive rate of returns on a majority of these ETFs has also been a big draw for investors. For investors seeking portfolio diversification, inflation protection, and tax-efficient exposure to gold, ETFs remain a compelling option.
Global factors like central bank buying, geopolitical tensions, and expectations of US rate cuts have turned gold into a preferred safe-haven asset. This has led to a surge in gold prices to record high levels in the past few months, with prices crossing over Rs 1,25,000 per 10 gram (999 purity) recently.
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All these factors have turned gold ETFs into the flavour of the season as investors prefer parking their funds due to better liquidity, transparency and global price alignment.
“At the portfolio level, gold was significantly under allocated. Given the rising uncertainties, better performance of gold and a strong outlook on it, investors are considering allocating gold to their portfolios. That’s why you are seeing a significant flow coming to gold ETF,” said Chirag Mehta, Chief Investment Officer (CIO), Quantum AMC.
Tax clarity drive inflows
One of the important factors which has played out in favour of gold ETFs is the tax clarity provided in the Union Budget 2025-26. Earlier, gold ETFs were taxed as per individual’s tax slabs. However, this year’s budget clarified that long-term capital gains on gold ETF held for over 12 months will be taxed at 12.5 per cent.
“This clarification (in Union Budget 2025-26) made it more attractive for investors to invest into gold ETFs,” said a fund manager.
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Gold ETF to remain preferred investment choice
Analysts expect inflows into gold ETFs to continue supported by a weak US dollar, persisting geopolitical tensions, tariff uncertainties, increased gold purchases by global central banks.
There is a very strong reason to be bullish on gold and with it in gold ETFs in the medium term,” said a market expert.
