Gold ETFs Witness Strong Inflows for Third Straight Month
Gold exchange-traded funds (ETFs) continued their winning streak in July, recording a net inflow of ₹1,256 crore from investors, marking the third consecutive month of positive investments. Although this was lower than June’s robust ₹2,080 crore inflow, the steady demand reflects investors’ growing preference for gold as a safe-haven asset amid global economic uncertainties and market volatility.
According to the latest data from the Association of Mutual Funds in India (AMFI), the surge in inflows has pushed the net assets under management (AUM) of gold ETFs to an all-time high of ₹67,635 crore. This represents a massive 51% year-on-year growth, driven by both fresh investments and the appreciation in gold prices.
Bullion Prices Fuel Investor Appetite
In July, the average gold spot price on the Multi Commodity Exchange (MCX) stood at ₹97,481 per 10 grams, reflecting a 2.5% month-on-month increase. This rise further boosted the value of holdings, making gold ETFs more attractive for those seeking a hedge against inflation and currency fluctuations.
Gold ETFs are passive investment vehicles that track domestic gold prices, allowing investors to gain exposure to the precious metal without the complexities of physical storage. This tax-efficient structure, combined with liquidity and ease of trading on stock exchanges, has made them a preferred choice for both retail and institutional investors.
Global Gold Demand Mirrors Domestic Trend
The trend in India aligns with global movements. According to the World Gold Council (WGC), global gold ETFs also witnessed strong demand in July, with total inflows amounting to $3.2 billion. North America and Europe dominated these inflows, as central bank rate decisions, economic slowdown fears, and geopolitical tensions prompted investors worldwide to diversify portfolios through gold holdings.
Market analysts note that India’s ETF inflows have been driven not just by price appreciation, but also by strategic asset allocation by high-net-worth individuals (HNIs) and mutual fund investors aiming to balance equity market volatility.
From Profit Booking to Accumulation
The renewed buying interest comes after a phase of profit booking in March and April this year, when investors withdrew funds to capitalize on the surge in bullion prices. However, with inflationary pressures persisting and central banks keeping interest rate cuts on the horizon, sentiment has shifted back in favor of gold accumulation.
Investment advisors suggest that gold ETFs are being used as a tactical allocation tool, especially in times of uncertainty. Historically, gold has acted as an effective portfolio diversifier, offering negative correlation with riskier asset classes such as equities.
Top Players in the Segment
India hosts more than 20 gold ETF products, with Nippon India ETF Gold BeES being the largest by assets. Other major players include SBI Gold ETF, HDFC Gold ETF, and ICICI Prudential Gold ETF. The competition among fund houses has led to tighter tracking error management and improved liquidity, making it easier for investors to enter and exit positions without significant price slippage.
What Lies Ahead for Gold ETFs
Experts predict that the momentum for gold ETFs could persist in the coming months, particularly if global macroeconomic challenges remain unresolved. The possibility of a weaker dollar, dovish monetary policies, and geopolitical tensions could keep demand for gold buoyant.
However, market watchers caution that while gold can be a strong hedge, it should not dominate an investor’s portfolio entirely. Financial planners generally recommend a 5–10% allocation to gold for long-term portfolio stability.
With record-high AUM levels and sustained inflows, gold ETFs in India are poised to remain a critical part of the investment landscape, bridging the gap between traditional gold buying and modern investment needs.
