Gold Investment Gains Momentum: Why More Investors Are Turning to Gold ETFs

Gold continues to attract investor attention as stock market volatility prompts many investors to diversify their portfolios. The sharp rise in gold ETF assets over the past year highlights the growing preference for financial gold over physical jewellery.

Gold has long been considered an important asset in Indian households. But investment patterns are gradually changing. Instead of buying physical gold, an increasing number of investors are using financial products such as gold exchange-traded funds (ETFs) to gain exposure to gold prices.

The trend is reflected in the sharp increase in gold ETF assets under management (AUM).

Gold ETF AUM Rises 2.6 Times in a Year

In July 2025, the asset value of gold ETFs was around ₹68,000 crore. By July 2026, it had increased to approximately ₹1.73 lakh crore.

This means gold ETF assets grew by about 2.6 times in just one year. The increase reflects growing investor interest, although AUM growth can come from both fresh investments and an increase in the price of gold.

Gold ETFs provide investors with a way to participate in gold price movements without purchasing or storing physical gold. They can also be used as part of a diversified portfolio because gold does not always move in the same direction as equities or debt investments.

Silver ETFs Grow Even Faster

Silver has also attracted significant investor interest. The assets under management of silver ETFs increased from approximately ₹23,000 crore in July 2025 to ₹78,000 crore in July 2026.

That represents an increase of around 3.4 times in one year, faster than the growth recorded by gold ETFs.

However, gold and silver have different characteristics. Silver is widely used in industries such as electronics and solar power, making its demand dependent not only on investment but also on industrial activity. This can contribute to greater price volatility compared with gold.

Gold and Silver Prices Have Risen Sharply

As of August 21, 2026, gold prices had increased by 62% over the previous year, while silver prices had risen by 120%.

Such strong gains may attract investors, but past performance does not guarantee similar returns in the future. Both metals can experience periods of price declines, with silver generally showing greater volatility.

What Should Investors Consider?

Investors considering gold or silver ETFs should look beyond recent price performance. Factors such as investment objectives, time horizon, risk tolerance and existing asset allocation should be taken into account.

Gold and silver may form part of an investor`s alternative-asset allocation, but the appropriate proportion will vary from person to person. A commonly suggested range of around 10–15% of the overall portfolio may be considered as a reference point, rather than a universal recommendation.

Investors should also compare the expense ratio, tracking error, liquidity and market price of an ETF before investing.

Gold ETF or Gold Mutual Fund?

A Demat account is required to invest in gold and silver ETFs. Investors who prefer mutual funds can consider funds that invest in gold or silver, where a Demat account is generally not required.

Rather than making a large lump-sum investment at elevated price levels, some investors may prefer a systematic approach to spread purchases over time.

Gold as Part of a Diversified Portfolio

The rapid growth of gold and silver ETFs shows the increasing role of precious metals in investment portfolios. However, investors should not chase short-term returns simply because prices have recently risen.

Gold and silver are better viewed as supplementary assets within a broader financial plan. The right allocation depends on an individual`s income, age, financial goals, investment horizon and ability to handle market fluctuations.

Disclaimer: This article is intended for general informational and educational purposes only and should not be considered investment, financial, tax or legal advice. Gold and silver prices can fluctuate, and past performance does not guarantee future returns. Investors should consider their financial goals, risk tolerance, investment horizon and existing portfolio before making any investment decision. Please consult a qualified financial advisor or investment professional for personalised advice.