The recent fall in gold prices will soon revive investor interest in the yellow metal through exchange-traded funds, as the long-term outlook remains bright amid the ongoing war in West Asia.
Gold prices fell sharply by 5 per cent or ₹7,636 to ₹147,889 per 10 gram against ₹154,879 logged on Wednesday.
With this, gold prices have plunged ₹19,582 to ₹147,889 per 10 grams so far in March, in line with the weak trend in the global market. The precious metal had hit a high of ₹1.80 lakh per 10 grams in January.
However, it has been dipping ever since due to profit-booking. Given the current volatility, investors can consider a staggered investment option.
Investor inflows into gold ETFs remain strong
Investors have poured in ₹42,961 crore in gold exchange-traded funds last year, and the asset under management more than doubled to ₹1.28 lakh crore in December against ₹51,839 crore logged in January, 2025.
Interestingly, in the last two months, investors pumped in ₹29,295 crore, and the AUM increased to ₹1.83 lakh crore in February, according to the Association of Mutual Funds of India data.
Gold funds deliver strong returns
Gold mutual funds have been star performers in the last year, long before the war started. The Nippon India Gold Savings Fund has given a return of close to 85 per cent in the last year, while the Nippon India Gold ETF BeES has an 84 per cent annual return.
Gold funds from Axis, ICICI, HDFC and Tata Mutual Fund have also performed well in the same period. The returns have been staggering, leading to heavy profit-taking in January this year.
Experts see cautious optimism amid volatility
Indranil Pan, Chief Economist, YES Bank, said if the war continues in the medium term, the positioning in gold will be a delicate balance between real yields, the dollar’s direction, and, on the other side, the need for defensive investments.
“In 2025, major gold demand came from central banks hoarding up to diversify. While central banks’ demand may sustain in 2026, the pace may be slower than 2025,” he said.
Central bank demand and stagflation risks
According to a World Gold Council report, central banks, on a net basis, bought 5 tonnes in January, compared with an average of 27 tonnes per month in 2025.
Historically, gold prices have performed well in periods of stagflation, and such risks are building now, he added.