Gold breaks records, ETF investors pull back—inflows crash 47%!

Even as Gold prices broke records and reached all-time high levels, ETFs witnessed a decline of 47.22% in the monthly inflows to Rs 1,979 crore in February against an inflow of Rs 3,751 crore in January.

Gold ETF inflows in January 2025 were the highest monthly inflow in the category. On a yearly basis, the inflows in Gold ETFs surged by 99% from Rs 997 crore in February 2024 to Rs 1,979 crore in February 2025.

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“The decline in inflows can be attributed to profit booking, as gold surged to an all-time high last month, prompting investors to lock in gains. Additionally, equity market corrections presented attractive buying opportunities, leading some investors to shift focus from gold ETFs to equities,” commented Nehal Meshram, Senior Analyst – Manager Research, Morningstar Investment Research India.

In February, Gold ETFs delivered an average return of 3.34% with UTI Gold ETF being the top performer. The scheme delivered 3.70% return in February. Kotak Gold ETF, Zerodha Gold ETF, and DSP Gold ETF gave 3.54% return in the mentioned period.

Invesco India Gold ETF and Tata Gold ETF delivered 3.08% and 2.48% returns respectively in February.

“Furthermore, anticipation of potential interest rate cuts by global central banks has reduced the urgency for safe-haven investments, dampening demand for gold ETFs. Despite the slowdown in inflows, gold remains a crucial portfolio diversifier. With global economic conditions remaining uncertain, gold is expected to retain its appeal as a hedge against market instability in the months ahead,” Nehal said.

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The assets under management (AUM) of Gold ETF went up by 7% from Rs 51,839 crore in January to Rs 55,677 crore. On a yearly basis, the AUM has surged by nearly 95% from Rs 28,529 crore in February 2024.

“The gold ETFs’ net inflows have decreased, but their AAUM grew by 15% to Rs 55,001.75 crores. This rise is due to a sharp rally in gold prices, which can also fuel the investor’s interest in the gold ETFs in the near future,” said Ajay Garg, CEO, SMC Global Securities.

According to the latest data by Association of Mutual Funds in India (AMFI), only one new scheme was launched in the category in February. Union Gold ETF collected Rs 11 crore.