With gold and silver prices reaching new heights, investors are increasingly turning to exchange-traded funds (ETFs) that are backed by these precious metals. ETFs offer a more affordable alternative to direct ownership of gold and silver while providing the convenience of liquidity.
Investing in gold ETFs saw a remarkable increase in the quarter ending in August, with inflows soaring to ₹5,527 crore, up from ₹209 crore recorded between March and May. This surge indicates a growing trend among gold jewellery purchasers who are opting to invest their funds in ETFs instead. Similarly, investments in silver ETFs rose from ₹2,278 crore in the previous quarter to ₹5,668 crore during the same period.
Gold and silver ETFs have attracted investments totaling ₹11,467 crore and ₹8,603 crore, respectively, this year. The assets under management for gold ETFs surged by 40 percent, reaching ₹72,496 crore last month compared to ₹51,839 crore in January. This increase occurred despite ongoing profit-taking by investors.
The price of gold has rallied by 34 percent, now standing at ₹110,869 per 10 grams, compared to ₹82,480 in January. Globally, gold prices rose by 32 percent to $3,698 an ounce from $2,798 an ounce at the beginning of the year.
Jigar Trivedi, Senior Research Analyst at Reliance Securities, noted that gold prices remain near record highs as market participants anticipate a 25-basis point rate cut from the U.S. Federal Reserve during its two-day policy meeting that begins on Wednesday. Trivedi highlighted that the Fed faces challenges, including a legal dispute regarding its leadership and pressures from U.S. President Donald Trump concerning monetary policy.
Manav Modi, Analyst for Precious Metals at Motilal Oswal Financial Services, stated that central banks worldwide have added approximately 1,000 tonnes of gold to their reserves each year for the last several years. Although this pace has slowed slightly this year, consistent net buying by major central banks is expected to continue providing support to gold prices.
Pallav Bagaria, Director at Sapient Finserv, remarked that investors often pursue assets after observing past performance, noting that gold has shown exceptional returns in recent years. He mentioned that data indicates central banks have begun to hold more gold than U.S. dollar assets for the first time, which has contributed to inflows into gold.
Additionally, the pause in sovereign gold bond issuances has led to increased interest in ETFs, even though the two are dissimilar financial instruments. Saumil Gandhi, Senior Analyst for Commodities at HDFC Securities, observed that investors are gravitating toward digital gold formats such as ETFs, mutual funds, and sovereign gold bonds (in the secondary market). These options provide liquidity, flexibility, transparency, no storage issues, straightforward tracking, lower transaction costs, and address concerns regarding purity.
Despite a decline in jewellery demand, the investment demand for gold has risen significantly, driven by robust returns seen over the past three years.
Published on September 16, 2025.
