Gold ETF inflows jump 67% to Rs 2,596 crore in August. Why are investors piling in?

Fri Sep 11 2026

Gold ETFs witnessed a sharp rise in investor interest in August, with monthly inflows jumping 67% to Rs 2,596 crore from Rs 1,558 crore in July, according to the latest data from the Association of Mutual Funds in India (AMFI).

The recent rise in gold ETF inflows comes amid gold’s strong performance and continued global uncertainty. Investors have also been assessing the impact of interest-rate expectations, currency movements and bond yields on gold prices.

Rajesh Minocha, a Certified Financial Planner (CFP) and founder of Financial Radiance, told ETMutualFunds that interest in gold is rising, driven by its recent strong performance and ongoing global uncertainty.

Many investors are considering potential changes in interest rates. Gold remains a valuable diversification tool, offering balance when equities are volatile. However, a surge in fund purchases should not be seen as a signal to invest hastily, Minocha further said.

Jasmeet Singh, Executive Director, Anand Rathi Wealth Limited, told ETMutualFunds that the rise in interest is partly due to recency bias, where investors tend to chase asset classes that have performed well recently and move away from those that have underperformed.

“This recent performance chasing was seen with gold in January 2026 as well, when it hit its all-time high of around Rs 1.75 lakh, and we are seeing this yet again with the inflows in August 2026. Gold ETFs' net inflows increased by around 67%, and if we look at the price, we can see the same trend being confirmed. Gold prices rose around 15% from July to August, due to geopolitical uncertainty, a falling dollar and falling Treasury yields,” Singh said.

Singh further said that investors should remember that gold’s price movements have no fundamental backing and are primarily driven by the above factors and demand and supply. Hence, this renewed interest can be attributed to its recent performance.

On a yearly basis, gold ETF inflows went up 19% from Rs 2,189.51 crore in August 2025, the data showed.

Nitin Agrawal, CEO, Mutual Funds, InCred Money, said gold ETF inflows accelerated to Rs 2,597 crore in August, the strongest monthly reading since the pre-profit-booking period, and the geopolitical environment and global macro uncertainty continue to support the case for gold as a portfolio hedge.

The sharp increase in gold ETF inflows may tempt investors to increase their allocation to gold. However, experts caution against making allocation decisions based solely on recent inflows or price performance.

Singh said investors should not use past performance as an indicator when deciding their allocation to gold. Investors who invested in gold at its peak after looking at its rally in January are now sitting on losses as gold has corrected 20% since then.

Singh further said that allocation decisions should be based on an investor's overall strategy rather than market movements. Looking at gold since 1990, he said it has delivered returns greater than 10% in 48% of the instances, compared with almost 70% for equities.

For returns greater than 7%, gold has delivered them in 65% of the instances, he said. Long-term investors can therefore view gold as a replacement for debt rather than equity, with an allocation of up to 20% of the debt portion of the portfolio.

Minocha said investors should not increase their gold allocation simply because gold ETF inflows have risen sharply. For long-term investors, he said an allocation of 5-10% to gold can typically provide sufficient diversification, although the exact allocation should depend on the overall portfolio and risk tolerance. “If your current holdings align with your investment plan, you don't need to add significantly,” Minocha said.

 How did gold ETFs perform in August?

In August 2026, gold ETFs delivered an average return of 8.76%. There were 26 gold ETFs during the period.

Out of these 26 funds, Zerodha Gold ETF delivered the highest return of around 8.87%, followed by UTI Gold ETF, which gave an 8.85% return. The Wealth Company Gold ETF offered the lowest return of around 8.57%. Nippon India ETF Gold BeES, the largest fund in the category based on assets under management, delivered 8.78% in August.

 Is the current gold rally sustainable?

Himanshu Srivastava, Principal, Manager Research, Morningstar Investment Research India, said that on a cumulative basis, gold ETFs attracted net inflows of approximately Rs 41,475 crore during January-August CY2026, highlighting the sustained investor interest in the category this year.

The strong flows have come despite elevated gold prices, suggesting that investors continue to view gold as a strategic portfolio allocation rather than merely a short-term tactical trade. In CY2025, the segment received net inflows of Rs 42,961 crore, Srivastava further said.

Gold's strong recent performance has also raised concerns about whether the rally can continue or whether investors should prepare for a correction.

Minocha said gold has demonstrated long-term support, but rapid gains are often followed by pullbacks. Markets typically pause and consolidate before advancing further and gold’s price movement is rarely linear. Investors should therefore anticipate volatility and not assume recent gains will continue uninterrupted.

Singh said gold prices are influenced by several factors, including geopolitical uncertainty, central bank buying, interest-rate expectations, dollar movements and demand-supply conditions and investors should not view the current rally as a fundamental strengthening of gold as an asset class. He said the recent move reflects increased momentum towards gold amid the prevailing geopolitical scenario.

“If gold and commodities deliver high returns in one year, they tend to mean revert over the next few years,” Singh said. He added that gold has already corrected around 20% from its January peak and investors should expect further price volatility.

 What is the outlook for gold and Gold ETFs?

According to a release by Emkay Wealth Management, gold was trading at around US$4,328 per ounce as of July 31, 2026.

The release further said that Gold ETFs have delivered strong returns over the longer term. As of July 31, 2026, the one-year returns of leading Gold ETFs stood above 43%, with HDFC Gold ETF delivering 43.47%, Kotak Gold ETF 43.53% and Nippon India ETF Gold BeES 43.24%. Over three years, the respective schemes delivered 32.37%, 32.49% and 32.27%.

Despite the recent rise in gold prices and ETF inflows, experts believe investors should focus on gold’s role in a diversified portfolio rather than chase recent returns.

Singh said gold has delivered an average return of 11% since 2012, but its Sharpe ratio stood at 0.38. In comparison, equity delivered an average return of 12%, with a Sharpe ratio of 1.25 over the same period.

According to Singh, this highlights gold’s relatively weaker long-term wealth-generation potential and its cyclical nature, where a strong-performing year can be followed by subpar or negative returns.

“Hence, investors should not rely on gold as an asset class, and should stick to an allocation of 80:20 in equity to debt,” Singh said. He views gold as a defensive asset like debt and believes it should remain within the debt portion of the portfolio.

Minocha, however, remains positive on gold over the medium term. He said central bank purchases and geopolitical risks continue to support demand, while gold’s diversification benefits remain significant.

“However, when prices are elevated, maintaining an appropriate allocation should take priority over chasing recent returns,” Minocha said.

He added that Gold ETFs offer convenient access to gold, particularly for investors seeking liquidity and transparency. However, he prefers taking gold exposure through the multi-asset route as part of a diversified portfolio.

Source: https://economictimes.indiatimes.com/