Gold ETF Inflows Slow to ₹3,300 Crore in October as FoF Subscriptions Halted

Investments in gold exchange-traded funds (ETFs) experienced a marked slowdown in October, with net inflows estimated at approximately ₹3,300 crore. This marks a decline from the seven-month peak of ₹4,450 crore recorded in September. The slowdown coincided with most asset management companies (AMCs) halting subscriptions to their gold fund of funds (FoFs) during the second half of the month.

Gold ETFs attract capital through three main channels. First, individual investors purchase units on stock exchanges. Second, large investors can create units directly with AMCs for transactions exceeding ₹25 crore. Third, gold FoFs invest in the underlying gold ETFs, acting as intermediaries for smaller investors seeking exposure to gold.

Following directions issued by the Securities and Exchange Board of India (SEBI), many fund houses suspended fresh subscriptions to gold FoFs. This step was taken amid concerns related to escalating gold imports and the resultant pressure on the Indian rupee.

The interest in gold ETFs and silver ETFs surged notably in 2025, driven by a strong rally in precious metals. However, prices have softened in 2026, with a sharp correction observed particularly in the past two months. Gold prices fell close to 10 percent between September and October 31. When measured in Indian rupees, current gold prices have dropped about 25 percent from their all-time highs.

N S Ramaswamy, head of commodity research at Ventura, explained the market dynamics: "Pressures have built up through US Federal Reserve rate hike expectations, as concerns over persistent inflation have maintained a tightening bias. This structural environment has pushed up US bond yields and kept the US dollar strong, increasing the opportunity cost of holding non-yielding assets like gold." This scenario has contributed to the recent decline in gold prices.

Satish Dondapati, a fund manager at Kotak Mahindra AMC, offered insights on the short-term outlook for gold. He noted, "Gold may remain under pressure in the near term, with further volatility possible. Investors should avoid deploying their entire amount at current levels and instead consider staggered buying during price dips. Gold remains a valuable component of a long-term portfolio as a hedge against uncertainty and for diversification purposes."

The slowdown in gold ETF inflows reflects a broader market adjustment as investors recalibrate their positions in light of changing economic conditions and regulatory measures. Gold has traditionally been viewed as a safe haven asset, especially during periods of market uncertainty and inflationary pressures. Its role in portfolios often centers on diversification and risk mitigation.

In recent years, gold ETFs have gained popularity among Indian investors as a convenient and cost-effective way to gain exposure to gold without holding the physical metal. This trend has been reinforced by the growth of FoFs, which allow smaller investors to access gold ETFs efficiently. However, regulatory interventions aimed at managing the impact of gold imports on the currency have prompted fund houses to temporarily pause new FoF subscriptions.

The precious metals market remains sensitive to global economic indicators, including US monetary policy, inflation rates, and currency fluctuations. Developments in these areas will likely continue to influence investor sentiment and the flow of funds into gold-related financial products.

For investors considering gold exposure, the current environment suggests a cautious approach with an emphasis on long-term objectives rather than short-term gains. Staggered investing and portfolio diversification remain key strategies to manage the inherent volatility in gold prices.