Gold ETFs: Gold and its poorer cousin silver have emerged as the best-performing assets this year, significantly outpacing returns offered by equity and the crypto market. Gold’s stellar surge in the year 2025 has lured investors to the market, with inflows into exchange-traded funds remaining positive for the seventh month in a row.
According to AMFI data, continued to witness healthy investor interest in November, recording net inflows of ₹3,741 crore. The returns offered by the top-performing gold ETFs this year have been upward of 72%, increasing their lure for investors.
But the question is, has this rally in gold ETFs and gold prices run ahead of fundamentals?
“The rally has been powerful, no doubt — and some part of it is sentiment-driven. Investors rushed into ETFs expecting lower global interest rates and looking for safety, which pushed up faster than traditional fundamentals would normally justify,” said Akshat Garg, Head of Research and Product at Choice Wealth.
However, Garg is quick to point out that the demand environment and structural tailwinds remain, with central banks still accumulating gold, and the US dollar remaining weak. A weak greenback makes gold more lucrative for buyers of other currencies. Additionally, the rate cuts by are expected to go ahead, which gives a further fillip to non-interest-yielding bullion.
So the move isn’t a bubble, but yes, momentum has added an extra layer of froth on top of improving fundamentals, Garg opined.
Can rally in gold ETFs continue?
According to analysts, the upside going ahead is open but could be more measured. Some of the factors that could drive buying in gold include, and in turn could keep interest in gold ETFs alive, include:
1) Rate cut signals: Clear signals of rate cuts or softer real yields can instantly make gold and silver more attractive, said Garg. Last week, the cut rates by 25 bps for the third time this year. Going ahead, gold bulls are also betting on further monetary easing in the US next year.
In an interview with the Wall Street Journal on Friday, President called for aggressively lowering rates and said he expected the next Fed chair to consult with him on monetary policy. He named Kevin Hassett and Kevin Warsh as his top choices to succeed .
2) Sustained ETF buying: The sustained ETF inflows are expected to keep gold prices elevated because every wave of buying tightens supply and pushes prices higher, the Choice Broking analyst said. So far in 2025, gold ETF inflows have swelled to $378.7 million, according to the World Gold Council report.
3) Weakness in US dollar: The dollar hovered near a two-month low hit last week, making bullion more attractive for overseas buyers. Analysts believe as long as the greenback remains weak, gold demand is expected to be higher.
4) Gold-silver ratio: The gold–silver ratio is close to its long-term average, which supports further upside, but if it falls toward the historical 60–62 range, it may trigger sharper price swings and higher volatility as silver’s outperformance becomes stretched.
Risks to gold rally
Garg, meanwhile, said the biggest risk for gold ETFs is a macro surprise: If global growth stays hotter than expected or inflation gets sticky, interest rates could remain high, which is negative for gold and .
“The second risk is the nature of ETF-driven rallies — when positioning gets crowded, even a small bout of profit-taking can trigger sharp corrections,” he added.
Additionally, Nehal Meshram, Senior Analyst, Morningstar Investment Research India, told Mint that the biggest near-term risk is a delay in rate cuts by major central banks, especially the US Federal Reserve. “If real yields remain elevated for longer, the opportunity cost of holding gold increases, which can cap upside momentum.”
He said that after such a sharp rally, gold is more vulnerable to profit-taking. So while the long-term case for gold remains strong, the near-term movement could be volatile if any of these factors change, he noted.
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.