Gold ETFs attract ₹4,451 crore in September amid market volatility: 5 things investors should know this festive season

With the festive season underway, gold is drawing attention not just from jewellery buyers but also from investors looking to diversify their portfolios. Gold exchange-traded funds (ETFs) have seen a sharp rise in inflows, reflecting growing interest in the precious metal amid volatility in stock market.

The trend comes even as equity mutual funds continue to attract investor money, suggesting that investors may be adding gold to their portfolios rather than moving away from equities altogether.

Manish Mehta, Chief Business Officer at SBI Mutual Fund, said assets under management in gold ETFs had reached ₹1.86 lakh crore, approaching their recent all-time high. He attributed the trend to investors seeking a defensive allocation amid equity market declines and uncertainty in debt markets, PTI reported.

So, what is driving demand for gold ETFs, and what should investors consider before investing?

1. Gold ETF inflows rise 71% in September

Gold ETF inflows increased by around 71% month-on-month in September, rising to ₹4,451 crore from ₹2,597 crore in August. The increase highlights growing interest in gold-linked investments as investors assess market risks and look for ways to diversify their holdings.

However, the rise in inflows does not necessarily mean investors are selling equities to buy gold. Some may simply be adding gold to their existing portfolios to spread their investments across asset classes.

2. Global investors are also turning to gold

The trend extends beyond India. In its September 2026 report, the World Gold Council (WGC) said physically backed gold ETFs attracted US$10 billion globally during the month, taking third-quarter inflows to a record US$31 billion.

Indian gold ETFs attracted US$496.2 million in September, taking year-to-date inflows to approximately US$4.7 billion, according to the WGC.

The council said inflows into Indian funds may have been supported by weakness in domestic equities, buying during the price correction and demand for portfolio diversification.

3. Why are investors turning to gold amid market volatility?

Gold is often considered a portfolio diversifier because its price does not always move in line with equities and bonds. Concerns over equity valuations, inflation, geopolitical developments and economic uncertainty can prompt investors to increase their exposure to the precious metal.

“When financial markets correct sharply, gold has historically shown the ability to hold value better. This difference in behaviour helps reduce overall portfolio volatility and smooth the investment journey,” said Shweta Shastri, a Certified Financial Planner.

The latest WGC data offers an interesting signal. Global gold ETF holdings increased in September despite a decline in gold prices. The council noted that some investors appeared to view the price pullback as an opportunity to build or maintain positions rather than reduce their exposure.

4. Gold ETFs or physical gold: What should investors consider this festive season?

The choice depends largely on the purpose of the purchase.

Physical gold may make more sense for those buying jewellery for personal use, weddings or festive occasions. However, jewellery purchases can involve making charges, and resale proceeds may differ from the original purchase cost.

Gold ETFs, on the other hand, allow investors to gain exposure to gold prices without having to store the metal. They are traded on stock exchanges and require a demat and trading account.

The two serve different purposes. Jewellery offers personal-use value, while gold ETFs are primarily an investment route.

5. How much gold should investors hold?

The WGC's research on pension funds offers examples of how institutional investors incorporate gold into long-term portfolios. Selected pension funds in countries such as the Netherlands, the US, the UK and Australia have held gold allocations of around 2% to 5%.

These examples should not be treated as a universal recommendation for retail investors. The appropriate allocation depends on an individual's financial goals, investment horizon, risk tolerance and existing holdings.

“Gold should account for around 10% of a portfolio. Historically, this has been considered a balanced allocation, enough to protect volatility without compromising long-term wealth creation,” Shastri said.

Investors should also account for the gold they already own in the form of jewellery, coins or bars before deciding how much additional exposure they need through ETFs.

The recent rise in inflows highlights gold's appeal during uncertain times. For investors, however, the decision should be based on their financial goals and overall asset allocation rather than the expectation that gold prices will continue to rise.