After a 53% rally in 2025, Gold ETFs face correction — time to rebalance portfolios, say experts

Gold exchange-traded funds (ETFs) have been among the top-performing asset classes of 2025, delivering nearly 53% year-to-date (YTD) returns. This sharp rally — driven by global economic uncertainty, persistent geopolitical tensions, and aggressive central bank gold purchases — has significantly boosted investor interest in gold-backed investment products.

However, market experts and fund managers are advising investors to rebalance their portfolios as gold’s exceptional run may have led to overexposure. According to Satish Dondapati, Fund Manager at Kotak Mutual Fund, investors whose gold allocations exceed 20% should consider trimming them back to a more balanced 10–15% range, depending on individual risk tolerance and financial goals. “The long-term outlook for gold remains positive, supported by economic uncertainty and global demand. But maintaining diversification is key to managing portfolio risk,” Dondapati said.

Gold’s correction after record highs

Gold prices have seen some recent volatility following months of strong gains. On the Multi Commodity Exchange (MCX), the December 2025 contract recently settled at Rs 1,19,646 per 10 grams, down about 1.08% after briefly touching Rs 1,18,450. This represents a 9.6% decline, or nearly ₹12,700 below the all-time high of ₹1,32,294 per 10 grams.

Despite this correction, experts say gold continues to play an essential role as a portfolio diversifier and inflation hedge amid global economic slowdowns and interest rate uncertainties. The broad consensus is that gold remains a strategic long-term investment, though fresh allocations should be made carefully. thereby balancing portfolio risk.”

Best performing gold ETFs in 2025

Over the past year, gold ETFs have demonstrated exceptional performance across multiple timeframes. In the 1-week period, Union Gold ETF FoF – Direct Plan, Mirae Asset Gold Silver Passive FoF – Direct Plan, and LIC MF Gold ETF showed relative resilience despite minor declines, reflecting short-term corrections after a strong rally. For 1 month, LIC MF Gold ETF and UTI Gold ETF led with over 5% returns, driven by global demand for safe-haven assets. Over 3 months, Edelweiss Gold and Silver ETF FoF topped with gains above 26%. On a 1-year horizon, UTI Gold ETF delivered around 52.8%, leading the pack.

Top 3 Gold ETFs - 1 Week
Fund Name  Return (%)
Union Gold ETF FoF - Direct Plan       -4.39
Mirae Asset Gold Silver Passive FoF - Direct Plan       -4.49
LIC MF Gold ETF       -4.49

Top 3 Gold ETFs - 1 Month
Fund Name  Return (%)
LIC MF Gold ETF        5.37
UTI Gold Exchange Traded Fund        5.33
Invesco India Gold ETF        4.97

Top 3 Gold ETFs - 3 Months
Fund Name  Return (%)
Edelweiss Gold and Silver ETF FoF - Direct Plan       26.21
LIC MF Gold ETF       23.46
UTI Gold Exchange Traded Fund       22.83

Top 3 Gold ETFs - 1 Year
Fund Name  Return (%)
UTI Gold Exchange Traded Fund       52.84
LIC MF Gold ETF       52.65
Invesco India Gold ETF       52.26

Gold ETFs and Gold FoFs

A Gold ETF is a mutual fund that invests in 99.5% pure physical gold, with each unit representing about 0.01 grams of gold. These ETFs are listed and traded on stock exchanges, offering real-time liquidity, no making charges, and transparent market-linked pricing.

Prominent gold ETFs in India include: Nippon India Gold ETF, SBI Gold ETF, HDFC Gold ETF, ICICI Prudential Gold ETF, Axis Gold ETF, Kotak Gold ETF, Aditya Birla Sun Life Gold ETF, and Mirae Asset Gold ETF.

Investors need a Demat and trading account to transact in gold ETFs. For those without one, Gold Fund of Funds (FoFs) provide indirect exposure by investing in these ETFs. They can be accessed via any mutual fund platform and allow SIP-based investing, though they generally carry slightly higher expense ratios due to their structure.

Choosing the right gold fund

Financial advisors recommend evaluating three key metrics before choosing a gold ETF or FoF:

Expense Ratio: Lower costs (typically 0.30–0.80%) translate into higher retained returns.

Liquidity: Higher trading volumes ensure easier buy/sell transactions and minimal price deviations.

Tracking Error: The smaller the deviation from actual gold prices, the better the ETF’s performance.

Experts also caution that while gold serves as a reliable hedge against market volatility, it does not generate income like equities or debt. As Value Research noted, “Gold preserves wealth during turbulence but does not create earnings. Limit allocations to 5–10% and invest gradually through SIPs rather than chasing momentum.”

How to invest during market correction

Given the recent surge in prices, experts recommend staggered investments instead of lump-sum allocations. Investing through Systematic Investment Plans (SIPs) or Systematic Transfer Plans (STPs) in gold ETFs or gold mutual funds can help average out costs and mitigate short-term volatility. Investors with a longer investment horizon — typically five years or more — may use price dips to gradually accumulate exposure, while those with higher allocations may consider partial profit-taking to rebalance their portfolios.

For conservative investors, multi-asset allocation funds offer a prudent route to gain exposure to precious metals. These funds dynamically adjust their exposure to gold, silver, equities, and debt depending on market conditions, offering diversification and professional management. 

Even with the recent correction, gold ETFs remain one of the most transparent and efficient ways to own gold, offering investors a blend of safety, liquidity, and long-term wealth preservation in uncertain times.