India's physically backed gold exchange-traded funds (ETFs) saw their largest monthly inflow in September, pushing assets under management to a record $10 billion, as investors flocked to the precious metal amid weak stock market returns.
Higher inflows into ETFs will lift gold imports to the world's second-biggest consumer and are set to support global prices that hit records this week. The surge in imports could widen India's trade deficit and weigh on the weaker rupee, however.
Traditionally dominated by jewellery, coins, and bars, India is now witnessing a shift, with urban investors increasingly turning to gold ETFs as prices rally to record highs.
In September, gold ETFs recorded inflows of $902 million or 7.3 tons to take total holdings to a record 77.3 tons, data from the World Gold Council (WGC) showed.
Indian gold ETFs have seen a record $2.18 billion in inflows so far this year, surpassing all previous annual totals. In comparison, inflows were $1.28 billion in 2024, $295.3 million in 2023, and just $26.8 million in 2022.
The rise in gold ETFs was driven by a weaker local currency and higher investor demand, as people looked for a safe place to invest amid weak domestic stocks and ongoing geopolitical and trade uncertainties, the WGC said.
Local gold prices, which scaled a record peak of Rs 122,829 per 10 grams earlier on Wednesday, have risen 60% year-to-date, after gaining 21% last year.
India's benchmark Nifty 50 has risen around 6% so far in 2025 after rising 8.8% in 2024.
Investors who previously had little or no allocation to gold are now increasing their exposure, putting significant money into the metal and driving inflows into ETFs, said Vikram Dhawan, head of commodities and fund manager at Nippon India Mutual Fund, which manages India's biggest gold ETF.
This shift in allocation suggests that even if gold prices correct, investors are likely to see it as an opportunity to buy more, which could further boost inflows, Dhawan said.
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