When ICRA Analytics reported a 550% year‑on‑year jump in gold ETF inflows for September 2025, the numbers sent a clear signal: Indian investors are shifting gears ahead of the festive gold‑buying rush.
The surge—₹8,363 crore versus ₹1,233 crore a year earlier—came just weeks before Dhanteras 2025India, the traditional kickoff for the Diwali buying season. Experts say the rally reflects both cultural reverence for physical gold and a growing appetite for paper‑based alternatives that are backed by the same metal.
Why Gold Still Holds a Sacred Spot in Indian Portfolios
Gold isn’t just a financial asset in India; it’s woven into weddings, festivals and even everyday savings rituals. Sachin Jain, Regional CEO of World Gold Council in India, notes that "ETFs are essentially backed by physical gold, so they inherit the same cultural trust while offering liquidity and transparency."
That cultural trust explains why, despite the rise of digital platforms, the bulk of gold consumption still flows through bars and coins. Yet the convenience of buying a fraction of an ounce via a demat account is reshaping the market, especially among younger, tech‑savvy savers.
Gold ETF Inflows: Numbers That Tell a Story
The data is striking. Over the past five years, gold ETF inflows have posted a compound annual growth rate (CAGR) of 69.5%. In September alone, the ₹8,363 crore inflow translates to roughly 65 million units of the gold ETFs tradable on NSE and BSE.
- 2020: ₹1,200 crore total inflow
- 2022: ₹3,450 crore total inflow
- 2024: ₹5,800 crore total inflow
- 2025 (Sept): ₹8,363 crore total inflow
Even niche players like ICICI Pru and Kotak have seen their silver ETFs climb, but gold remains the headline act.
Price Performance: Physical Gold vs. ETFs
From Dhanteras 2024 to this year, the spot price of 24‑karat gold jumped from ₹78,840 per 10 grams to ₹1,28,200—a 63% rise in rupee terms and 53% in U.S. dollars. Manav Modi, Senior Analyst at Motilal Oswal Financial Services, points out that silver surged even faster, up 69% over the same period.
Because gold ETFs track the same spot price, their NAVs have mirrored this ascent almost perfectly, save for a thin expense ratio (usually 0.2‑0.3%). The real differentiation comes in the cost of ownership: physical gold carries GST, making‑charges, and locker fees, while ETFs only incur a small annual fund fee.
Expert Takeaways: Balancing Tradition with Efficiency
Siddharth Srivastava, Head of ETF Product at Mirae Asset Investment Managers (India), warns that "both gold and silver have upside, but a short‑term correction can’t be ruled out. Investors should stagger purchases and use drawdowns to their advantage."
Similarly, Tapan Patel of Tata Asset Management notes that the commodities have rallied about 60% and 80% respectively year‑to‑date, yet fundamentals—low real yields and geopolitical tension—still support further gains.
From a cost perspective, Trivesh D, COO of Tradejini, says digital gold “feels cheaper because you can start with ₹10, but GST and platform spreads bring the total cost close to buying physical coins.” He adds that for serious investors, gold ETFs remain the smarter, SEBI‑regulated alternative.
When it comes to larger ticket sizes, Prithviraj Kothari, Managing Director of RiddiSiddhi Bullions Ltd. and President of the India Bullion and Jewellers Association, explains: "Investments above ₹2‑3 lakh are more cost‑effective in physical form, as you avoid the cumulative platform fees that digital gold accrues over five years. For smaller sums, digital or ETF routes offer fractional buying and instant liquidity."
Practical Guidance: How to Choose Your Gold Vehicle
Here’s a quick decision tree for the typical Indian investor:
- Purpose: Gift or ritual? Go physical – bars, coins, jewellery.
- Time horizon: Short‑term (≤2 years) or need quick liquidity? Opt for gold ETFs.
- Ticket size: Below ₹100 000 – consider digital gold or ETFs; above that, compare storage costs versus platform fees.
- Tax considerations: GST (3%) applies to both physical purchases and digital gold; ETFs are exempt from GST but attract a capital gains tax on sale.
Most advisors recommend capping gold exposure at 5‑10% of a diversified portfolio, with a mix of gold bonds, ETFs, and a modest physical holding for cultural purposes.
Looking Ahead: What 2026 Might Hold for Gold Lovers
Analysts expect the ETF inflow trend to stay bullish, driven by greater financial inclusion and the ongoing digitisation of the investment ecosystem. If the rupee continues to weaken against the dollar, the INR‑priced spot price could keep climbing, keeping the ETF NAVs on an upward trajectory.
However, price corrections are possible if global interest rates rise sharply or if a major supply shock eases. Manav Modi cautions that "gold on COMEX may target $4,250, but investors should be ready for pull‑backs that present better entry points."
In practice, many retail investors plan to liquidate ETF holdings during Dhanteras, converting the proceeds into physical gold for gifting, then re‑entering the ETF market later in the year. This cyclical dance blends tradition with modern portfolio efficiency.
Frequently Asked Questions
How do gold ETF returns compare with physical gold after taxes?
Gold ETFs avoid the 3% GST that physical purchases incur, and they have lower annual costs (≈0.2‑0.3% expense ratio) versus making‑charges and locker fees on physical gold. After accounting for capital‑gains tax, ETFs typically deliver a net‑of‑tax return 0.5‑1% higher than a comparable physical holding over a five‑year horizon.
What ticket size makes physical gold more cost‑effective than ETFs?
According to Prithviraj Kothari, investments above roughly ₹2‑3 lakh start to benefit from lower cumulative platform fees, making physical bars or coins a cheaper option in the long run.
Can I buy gold ETFs without a demat account?
Yes. Gold ETF Fund‑of‑Funds (FoFs) let investors participate via SIPs, STPs, or lump‑sum payments without needing a separate demat or trading account. The FoF provider handles the underlying ETF holdings on your behalf.
What risks should I watch for with gold ETFs in 2025?
Short‑term price volatility remains a risk, especially if global interest rates rise or if a major geopolitical event eases demand for safe‑haven assets. Additionally, fund‑level tracking error, though usually minimal, can affect returns.
How does digital gold differ from gold ETFs?
Digital gold is a retail product that lets you buy fractional gold through a platform, often with a 3% GST and a modest annual custody fee. Gold ETFs, by contrast, are exchange‑traded securities with lower expense ratios and no GST, but they require a demat account unless accessed via an FoF.
