Gold holds firm despite ETF decline, safe-haven demand rises in volatile markets: Expert

Gold and silver exchange-traded funds (ETFs) declined by up to 5% on Friday even as prices of the precious metals opened higher on the Multi Commodity Exchange (MCX), but market veteran D D Sharma, Managing Director at MF King, said the broader trend still shows strong investor preference for gold amid global uncertainty and falling equity markets.

Silver ETFs led the decline, with Nippon India Silver ETF falling over 4%, while SBI Silver ETF, ICICI Prudential Silver ETF and Kotak Silver ETF also dropped around 4%. DSP Silver ETF and Groww Silver ETF slipped nearly 5% during the session. Gold ETFs also saw selling pressure, with ICICI Prudential Gold ETF, SBI Gold ETF and Nippon India Gold BeES falling about 2–2.5%, even as MCX gold and silver futures traded higher.

According to Sharma, the recent fall in ETFs should be seen in the context of global market volatility and profit booking after a strong rally in precious metals.

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“Global financial markets have been hit hard by the conflict in the Middle-East. In line with international trends, Indian equity markets have fallen more than 10% in the last one month. In the midst of the war, however, gold has been shining, with prices increasing by around 5% during the same period,” Sharma said.

He noted that domestic gold prices have risen sharply in recent weeks. “Prices have moved from around ₹1,55,000 per 10 grams to nearly ₹1,65,000 in the domestic market, despite geopolitical uncertainty. This shows that investors continue to see gold as a safe-haven asset during periods of instability,” he said.

Data from the Association of Mutual Funds in India (AMFI) also reflects strong investor interest in gold funds. Assets under management in gold ETF schemes stood at about ₹1.83 lakh crore in February 2026, which is around 165% higher compared to February 2025.

Sharma said the surge in inflows into gold funds is largely driven by the metal’s role as a portfolio diversifier. “Gold typically has a low correlation with equities and tends to move differently from stocks. When uncertainty rises or markets fall, investors shift towards gold to protect capital. This helps reduce overall portfolio volatility,” he explained.

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He added that strong returns over the past year also contributed to heavy profit booking earlier this year. “Gold mutual funds have been among the best-performing categories in the last one year. Some schemes have delivered more than 80% returns, which naturally led to profit booking in January and some moderation in AUM in February,” Sharma said.

Despite short-term declines in ETFs, Sharma believes the long-term outlook for gold remains supported by geopolitical risks, inflation concerns and continued volatility in global equity markets.

“During market crashes, geopolitical crises or high inflation, investors often sell stocks and buy gold. Because gold does not move in line with equities, it remains one of the most effective tools for diversification and stability in a portfolio,” he said.