Gold beats equities in 2025, making ETFs the go-to choice for investors; what's next in 2026

If 2025 has belonged to any asset class, it is precious metals -- gold, silver and somewhat platinum. Under gold investment, gold ETFs have emerged as the preferred gateway for investors seeking exposure to the yellow metal’s historic rally. As equity markets delivered modest gains, gold stood out both as a hedge and a return generator, pushing exchange-traded funds linked to gold into the spotlight.

Gold prices climbed nearly 75% in 2025, marking one of their strongest annual performances in decades. Silver outpaced even that, but it was gold’s consistency and defensive appeal that drew sustained investor flows. In contrast, benchmark equity indices such as the Nifty 50 posted single-digit returns, reinforcing the diversification value of gold in portfolios.

This shift in investor preference is clearly reflected in ETF data. Assets under management (AUM) of gold ETFs surged to around Rs 1.11 lakh crore by the end of 2025, more than doubling over the past year and rising over five-fold in three years. According to industry data, gold ETFs recorded net inflows of over ₹31,000 crore between January and November 2025, underlining strong and steady demand.

Several phases during the year 2025 saw gold ETFs trading at premiums to their indicative net asset values (iNAVs), signalling buying pressure that briefly outpaced supply. While such premiums corrected later, they highlighted the intensity of investor interest at peak moments of market uncertainty. Market participants say ETFs benefited from their transparent pricing, liquidity, and regulated structure at a time when gold prices were scaling new highs.

AMFI data shows that gold ETFs continued to attract inflows even in the latter part of the year. In November alone, net investments stood at Rs 3,741 crore, with some of the top-performing funds delivering returns of over 70% for the year. This performance helped cement gold ETFs as one of the most successful mutual fund categories of 2025.

Gold ETFs trade on stock exchanges, allowing investors to buy and sell units in real time during market hours, similar to equities. Each unit typically represents one gram of gold, making entry relatively affordable for investors with demat accounts. For those without demat access or those preferring systematic investments, gold ETF fund-of-funds (FoFs) and gold mutual funds offered an alternative, enabling SIP-based investing with low minimum amounts.

Other gold investment

The rally in gold also spurred interest in digital gold earlier in the year, particularly among younger investors and first-time buyers. Digital platforms allowed purchases of fractional gold for small sums, eliminating concerns around storage and purity. However, this segment lost momentum toward year-end after regulatory warnings. Data from NPCI showed that digital gold purchases via UPI dropped sharply in November, coinciding with the Securities and Exchange Board of India (SEBI) cautioning investors about unregulated digital gold products.

Gold ETFs over others

SEBI has consistently advised investors to prefer regulated instruments such as gold ETFs over digital gold or similar offerings that fall outside its oversight. Gold ETFs, offered by SEBI-registered mutual funds, are backed by physical gold that meets internationally accepted purity standards and is securely stored with independent custodians in India.

Currently, over 20 gold ETFs are listed on Indian exchanges, with combined AUM crossing the ₹1 lakh crore mark for the first time. These funds are required to invest at least 95% of their assets in physical gold or gold-backed instruments, ensuring close tracking of gold prices. A small portion—up to 5%—may be held in cash or cash equivalents for liquidity purposes.

Latest data shows that short- and medium-term gains in 2025 were driven largely by gold–silver combination funds rather than pure gold ETFs. Over one month, six months and one year, funds with silver exposure delivered significantly higher returns, benefiting from silver’s sharp rally and strong momentum. These strategies captured outsized gains as investors chased higher-beta precious metals during periods of heightened volatility. However, the same factors that boosted returns also increased risk, making performance more uneven. For investors with a tactical horizon, gold–silver FoFs clearly outperformed, highlighting that asset mix mattered more than fund selection in the short to medium term.

1 MONTH (Short-term momentum, high volatility)
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Fund Name                                              Return (%)
Kotak Gold & Silver Passive FoF – Direct               26.88
Edelweiss Gold & Silver ETF FoF – Direct               23.74
Mirae Asset Gold & Silver Passive FoF – Direct         21.19
Motilal Oswal Gold & Silver ETFs FoF – Direct          20.71
LIC MF Gold ETF FoF – Direct                            9.00

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6 MONTHS (Momentum + trend strength)
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Fund Name                                              Return (%)
Edelweiss Gold & Silver ETF FoF – Direct               76.01
Motilal Oswal Gold & Silver ETFs FoF – Direct          64.98
Tata Gold ETF                                          43.10
LIC MF Gold ETF FoF – Direct                           42.44
Aditya Birla Sun Life Gold Fund – Direct               42.38

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1 YEAR (Core performance benchmark)
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Fund Name                                              Return (%)
Edelweiss Gold & Silver ETF FoF – Direct              113.45
Motilal Oswal Gold & Silver ETFs FoF – Direct         101.20
UTI Gold ETF FoF – Direct                              76.86
Aditya Birla Sun Life Gold Fund – Direct               76.72
Tata Gold ETF                                          76.68

Going ahead, market participants believe gold ETFs could play an even larger role in household gold allocation going forward. As volatility in global markets persists and investors reassess portfolio risk, gold ETFs appear well-positioned to remain a core allocation—not just as a hedge, but as a mainstream investment choice shaped by the defining market trends of 2025.