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Gold ETF inflows at all-time high in January 2025; check what’s behind the surge

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2 min read | Updated on February 12, 2025, 17:46 IST

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SUMMARY

Association of Mutual Funds in India (AMFI) data has revealed that net inflows into gold ETFs have climbed to ₹3,751.4 crore in the month of January, growing from just ₹640 crore in December 2024. Many reasons including geopolitical tensions and market volatility are contributing to this surge.

Gold offers a risk premium, which is the value expected to be added to the metal due to global uncertainty and market volatility

Gold offers a risk premium, which is the value expected to be added to the metal due to global uncertainty and market volatility

Net inflows in gold exchange-traded funds (ETFs) have climbed to ₹3,751.4 crore in January 2025 from the nine-month low figure of ₹640.16 crore in December 2024, marking a stellar growth of 486%, according to the Association of Mutual Funds in India (AMFI) data. This is the highest-ever monthly net inflow recorded in Gold ETFs.

A gold ETF tracks domestic prices of physical gold. It is a convenient way of investing in gold without storage or authenticity concerns.

Gold ETFs hit a new record in the first month of 2025, while its previous record-high was seen in October 2024 when it jumped to ₹1,961.57 crore.

Additionally, net assets under management of gold ETFs increased by 16.24% in January to ₹51,839.39 crore from ₹44,595.60 crore in December.

Reasons behind the gold ETF rush

Gold is a safe haven, so investors seek refuge in buying the yellow metal when other investments seem risky, leading to a surge in gold’s demand and prices. Gold offers a risk premium, which is the value expected to be added to the metal due to global uncertainty and market volatility.

“Ongoing volatility in domestic and global equity markets heightened investors' risk aversion, leading many to seek refuge in gold ETFs, which are traditionally considered safe-haven assets,” CNBC-TV18 quoted Himanshu Srivastava, Associate Director-Manager Research at Morningstar Investment Research India, as saying.

Some of the potential factors behind the inflow:
Market fluctuations: Gold prices and demand have been on the rise on the back of geopolitical tensions and volatility in the stock market. This has been pushing investors further towards the yellow metal.
US tariffs: Experts believe that 25% US tariffs on Canadian and Mexican products and a 10% levy on Chinese goods could lead to high inflation, which would drive investors toward gold.
US Fed rates: The slower pace of interest rate cuts by the US Federal Reserve has increased the appeal of gold.
SGB discontinuation: The central government recently discontinued the Sovereign Gold Bond (SGB) scheme, citing high borrowing costs. This means that no new SGB tranches will be issued by the government. SGBs are a risk-free way of investing in gold, similar to gold ETFs. This discontinuation has led many investors to pump funds into Gold ETFs.
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