The world’s second-largest consumer will import more gold thanks to increased inflows into ETFs, which will also help sustain global prices that reached records this week.
As investors rushed to the precious metal despite poor stock market returns, India’s physically backed gold exchange-traded funds (ETFs) witnessed their greatest monthly inflow in September, increasing assets under management to a record $10 billion.
The second-largest consumer in the world will import more gold thanks to increased inflows into ETFs, which will also help sustain global prices that reached records this week. However, the increase in imports may worsen India’s trade imbalance and depress the value of the rupee.
India has seen a change in the past, with jewelry, coins, and bars dominating the market. As prices rise to all-time highs, urban investors are increasingly turning to gold exchange-traded funds (ETFs).
According to figures from the World Gold Council (WGC), gold ETFs had inflows of $902 million, or 7.3 tons, in September, bringing total holdings to a record 77.3 tons.
So far this year, inflows into Indian gold ETFs have reached a record $2.18 billion, exceeding all prior yearly totals. By contrast, 2024 had inflows of $1.28 billion, 2023 saw $295.3 million, and 2022 saw just $26.8 million.
A lower local currency and increased investor demand, as individuals sought a safe haven to invest in the face of poor domestic equities and persistent geopolitical and trade worries, were the main drivers of the growth in gold ETFs, according to the WGC.
After rising 21% last year, local gold prices have increased 60% so far this year, reaching a record high of Rs 122,829 per 10 grams earlier on Wednesday.
After growing 8.8% in 2024, India’s benchmark Nifty 50 has increased by around 6% so far in 2025.
According to Vikram Dhawan, head of commodities and fund manager at Nippon India Mutual Fund, which oversees India’s largest gold ETF, investors who previously had little to no allocation to gold are now expanding their exposure, making big investments in the commodity, and driving inflows into ETFs.
According to Dhawan, this change in allocation implies that even if gold prices rebound, investors would probably see it as a chance to purchase more, which might increase inflows even more.