Gold ETFs: 600% surge in monthly inflows to Rs 2,080 crore. Are you late to the party?
Gold ETFs
witnessed a surge of over 613% in monthly inflows to Rs 2,080 crore in June, market experts are of the opinion that
gold
prices have rallied in recent times due to a combination of global economic and geopolitical factors such as geopolitical uncertainty, central bank buying, inflation concern, and falling interest rates.
'Rising tensions globally, such as the India-US Trade Deal, conflicts in the Middle East, and Trump tariffs, have increased demand for gold as a safe-haven asset. Several countries have been aggressively adding gold to their reserves to diversify away from the US dollar and enhance financial security. India saw a huge jump to 72.6 tonnes of gold in 2024, the highest annual purchase in this three-year period,' Chethan Shenoy, Director & Head - Product & Research, Anand Rathi Wealth Limited shared with ETMutualFunds.
Shenoy further adds that the fear of inflation keeps gold appealing as a hedge and with inflation stabilizing, central banks (especially the US Fed) are expected to cut rates in 2025 as lower interest rates makes gold more attractive.
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Another expert believes that this surge is a shift in sentiment supported by resilient gold prices, geopolitical uncertainties and volatility in equity and fixed income markets.
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'The robust inflows in June indicate a decisive shift in sentiment, likely supported by resilient gold prices, geopolitical uncertainties, and volatility in equity and fixed income markets, which have revived gold's appeal as a safe-haven asset,' said Nehal Meshram, Senior Analyst – Manager Research, Morningstar Investment Research India.
In May, gold
ETFs
received an
inflow
of Rs 291.91 crore after witnessing outflows for two consecutive months. In March and April, gold ETFs witnessed an outflow of Rs 77.21 crore and Rs 5.82 crore respectively.
With gold ETFs gaining investors' interest, Shenoy mentions that when considering SIPs, investing in Gold through SIP is not the best option for investors as they would generate a better return investing in equity
mutual funds
. 'We suggest investors to maintain a balanced portfolio, with an asset allocation of 80:20 in equity to debt. But if one wants exposure to gold, it should not exceed 5-10% of their portfolio,' he adds.
There are two other mutual fund categories - dynamic asset allocation and multi asset funds. Dynamic asset allocation funds make investment in equity or debt that is managed dynamically and multi asset funds invest in at least three asset classes with a minimum allocation of at least 10% each in all three asset classes.
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Considering the investment universe of these two categories as well, one thing that all want to know is how do gold ETFs compare with other hedging options like multi asset funds or dynamic asset allocation funds?
Multi-asset and dynamic asset allocation funds are types of hybrid funds and cannot be directly compared with Gold ETFs as gold ETFs provide pure, single-asset exposure to gold and are typically used for hedging whereas hybrid funds invest across 2 or more categories, such as equity, debt, and commodities, the expert mentions.
'However, they often lack transparency, and investors have limited visibility or control over the actual allocation. It would be more beneficial for an investor to invest in pure-play equity and debt funds, with an allocation of 80:20 to ensure long-term stability and consistent wealth creation,' Shenoy advices.
The total assets under management of gold ETFs was recorded at Rs 64,777 crore as on June 30, 2025 witnessing a surge of 4% from AUM of Rs 62,452 crore in May. On a yearly basis, the AUM has grown by 89% from an AUM of Rs 34,355 crore as on June 30, 2024.
According to a report by ETMarkets, on Tuesday, gold and silver settled on a weaker note in the domestic and international markets. Gold and silver plunged in a highly volatile session due to long unwinding by traders ahead of the FOMC meeting minutes and Trump tariff fears. Traders booked profits in long positions ahead of the Fed's June meeting minutes.
The U.S. President imposed a 25% trade tariff on Japan and South Korea and also sent letters to dozens of countries to impose trade tariffs if a trade deal is not executed. However, he extended the tariff deadline until 1st August to make a trade deal.
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After analysing different probabilities of CAGR of
Nifty
vs Gold, the analysis shows gold has not been a consistent performer when compared to equity across different time frames as it's prices remain unpredictable which makes it a less dependable asset class for investment compared to Nifty, which has shown stable and consistent returns over the last 25 years.
When considering long-term wealth creation, Nifty maintains a much stronger probability of beating inflation and compounding wealth versus Gold, which have a higher standard deviation and lower risk adjusted return potential, Shenoy mentions.
'Gold is a defence asset like debt. Hence, the total allocation to gold and debt in your portfolio should not exceed 20%,' he further recommends.
Gold ETFs are exchange-traded funds that track the price of physical gold. Each unit of a Gold ETF is backed by a specific quantity of gold, usually equivalent to one gram. They are listed on stock exchanges, and you need a demat and trading account to buy and sell them.
(
Disclaimer
: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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