Gold has held a special place in the hearts and home of Indian buyers. It is more than a metal. Gold prices in India and globally have been hitting all-time highs in recent weeks, driven by escalating geopolitical tensions, fears of recession, a weakening U.S. dollar, and continued central bank buying. Despite this rally, gold exchange-traded funds (ETFs) in India witnessed net outflows in March 2025, marking a surprising divergence between price performance and investor behaviour.
According to AMFI data, investors pulled out funds from gold ETFs in March, even as the price of gold touched Rs 93,000 per 10 grams and breached $3,200 per ounce globally — historic levels for the yellow metal. In March 2025, investors withdrew Rs 77 crore from these funds, marking a notable trend divergence between physical gold prices and ETF investments in the country. This outflow signals a shift in investor priorities, despite the metal’s rising value.
This suggests that many investors may have chosen to book profits amid the rally, reflecting a more tactical rather than long-term approach to gold investing.
The outflows from gold ETFs come amid a backdrop of robust growth in gold prices. Historically, gold ETFs have been seen as a safe-haven investment, especially during times of economic uncertainty. However, the recent outflows suggest that investors are reconsidering their strategies as they grapple with the evolving economic climate. The decision to pull funds from gold ETFs could be linked to broader market conditions and the overall performance of the financial markets.
The divergence between the physical gold market and ETFs could reflect a preference for liquidity and direct exposure to the metal, bypassing the intermediary step of an ETF. It also hints at a potential reevaluation of risk management practices by investors who seek to balance diversification with direct asset ownership.
Major competitors in the gold ETF market have had to adapt to these changing dynamics. In India, entities like SBI Gold ETF and HDFC Gold ETF have traditionally held significant market positions. However, the current trend of outflows suggests that even established players are not immune to shifts in investor preferences, which may be driven by broader macroeconomic factors.
Gold ETFs are investment instruments that track the domestic price of physical gold and are traded on stock exchanges like shares. Each unit typically represents 1 gram of gold, and the value mirrors the prevailing market price after accounting for fund expenses. These ETFs are backed by physical gold and regulated by SEBI, making them a transparent and cost-efficient option for investors looking to gain exposure to gold without actually purchasing the metal.
Why did outflows occur in March?
Several reasons could explain the outflows:
Profit booking: Investors may have locked in gains as gold surged to record highs.
Shift to physical gold: With wedding season demand and the allure of tangible assets, some may prefer jewellery or coins.
Rebalancing portfolios: As gold’s value rises, some investors may have reduced exposure to avoid over-concentration in their portfolios.
Top Gold ETFs in India (as of March 2025)
| Fund Name | 1-Year Return (%) | 3-Year Return (%) | 5-Year Return (%) |
|---|---|---|---|
| LIC MF Gold ETF | 32.79 | 63.04 | 112.41 |
| HDFC Gold ETF | 32.96 | 63.47 | 112.38 |
| Kotak Gold ETF | 32.77 | 63.10 | 111.89 |
| Axis Gold ETF | 31.21 | 62.85 | 111.73 |
| Nippon India ETF Gold BeES | 32.59 | 62.92 | 109.79 |
| ICICI Prudential Gold ETF | 32.88 | 63.20 | 111.03 |
| Invesco India Gold ETF | 32.64 | 62.95 | 113.31 |
| UTI Gold ETF | 32.54 | 62.80 | 111.97 |
| Aditya Birla Sun Life Gold ETF | 32.79 | 63.04 | 112.41 |
| SBI ETF Gold | 32.45 | 62.70 | 110.85 |
Note: Returns are based on cumulative performance data as of March 2025.