Gold ETF Inflows Ease to ₹3,300 Crore in October Amid FoF Suspensions

Gold ETF Demand Cools as FoF Subscriptions Pause

October’s lower inflows reflect both a change in access through fund of funds and a more unsettled outlook for gold.

FoF suspensions narrowed one route into gold ETFs

The October inflow estimate, derived from assets under management data, came after September recorded a seven-month high. The decline coincided with most asset management companies suspending new subscriptions to their gold fund of funds (FoFs) during the latter half of October. The pause followed a Sebi direction issued amid concerns over rising gold imports and pressure on the rupee.

The distinction between gold ETFs and FoFs matters. Investors can access gold ETFs by buying units on stock exchanges, while large investments exceeding ₹25 crore can be made through direct unit creation with asset managers. FoFs provide another channel: they invest in underlying gold ETFs. A halt to fresh FoF subscriptions therefore restricts that route, but does not mean that all gold ETF investment channels have been suspended.

This helps explain why FoF suspensions and continued ETF inflows can coexist. It also means October’s total should be read in the context of a change in access, rather than treated as a standalone measure of investor appetite. The available figures do not separate the contribution from each of the three channels.

Price weakness adds to the shift in demand

The flow slowdown has arrived after a period of strong interest in gold and silver ETFs in 2025, when precious-metal prices rallied sharply. The subsequent correction has been pronounced: gold fell almost 10% in the two months ending October 31, and prices in rupee terms were 25% below their all-time highs. Such volatility can make investors more cautious even as lower prices may attract buyers looking to build positions.

There is also pressure from global financial conditions. N S Ramaswamy, head of commodity at Ventura, said expectations of US Federal Reserve rate hikes and hotter inflation fears had reinforced a tightening bias. Higher US bond yields and a robust dollar raise the opportunity cost of holding gold, which does not pay interest. These forces help explain why a precious metal that had attracted strong inflows can face selling pressure when the return available elsewhere becomes more competitive.

A portfolio role does not remove timing risk

Kotak Mahindra AMC fund manager Satish Dondapati said gold could remain under pressure in the near term and remain volatile. He advised against investing the entire amount at current levels, suggesting staggered purchases on declines instead. His view separates two considerations: near-term price direction is uncertain, while gold may still have a place in a long-term portfolio as a hedge against uncertainty and a source of diversification.

For investors, the latest inflow figure is not a signal that the metal’s longer-term role has disappeared. But it does underline that ETF flows can be influenced by both market conditions and the availability of investment routes. The suspension of FoF subscriptions, ongoing price weakness and the global rate outlook are separate factors; none alone establishes what gold prices or future flows will do.

Key Highlights

• Gold ETFs attracted estimated net inflows of about ₹3,300 crore in October, compared with ₹4,450 crore in September.
• Most AMCs suspended fresh gold FoF subscriptions in the second half of October following a Sebi direction.
• Exchange purchases and direct unit creation for investments above ₹25 crore remain distinct routes into gold ETFs.
• Gold prices fell almost 10% in the two months ending October 31 and were 25% below their all-time highs in rupee terms.
• Higher US bond yields and a robust dollar can weigh on gold by increasing the opportunity cost of holding a non-yielding asset.

Investor Note: Gold ETF inflows and recent price declines offer context, not a reliable entry signal on their own. Investors considering exposure should account for volatility, understand which investment route is available to them and avoid treating gold as a substitute for a diversified portfolio.