Gold ETFs See High Inflows Amid FoF Subscription Halts

Gold exchange-traded funds (ETFs) saw impressive inflows in October, amounting to ₹3,574 crore. This came even after mutual fund houses imposed a ban on new subscriptions for gold ETFs through fund of funds (FoFs) beginning on October 16, 2026. This trend raises questions about whether investors are pivoting toward direct investments in gold ETFs.

October Highlights

According to estimates from the World Gold Council (WGC), Indian gold ETFs experienced inflows of approximately $181 million (around ₹1,700 crore) in the first half of October alone. The total for the month climbed to $380.5 million, approximately ₹3,574 crore, indicating that a further $199.5 million (roughly ₹1,874 crore) flowed in during the latter half of the month.

The relatively stable influx of capital suggests that the halt on fresh FoF subscriptions did not significantly deter overall gold ETF investments. However, it remains unclear how much of the recorded figures in the latter half was attributed to new direct ETF purchases versus ongoing investments through existing FoFs.

Shifting Investment Patterns

According to Anindya Banerjee, head of currency and commodity research at Kotak Neo, the October numbers suggest an early trend towards direct ETF investments. Banerjee pointed out that while there are indications of this shift, it is still too early to determine if it will solidify into a consistent trend. He noted the significance of comparing inflows from the first half of October to the latter half, as the FoF restrictions only began midway through the month.

Despite the implementation of these restrictions, the data implies a continued interest in gold ETFs, as inflows remained relatively stable. Investors can now purchase gold ETFs directly through stock exchanges, create units through asset management companies (AMCs) for larger investments, or invest via FoFs, which collectively channel funds into existing gold ETFs.

The Current Investment Climate

Restrictions placed on the direct investment route for large investors were established in June, while fresh investments via gold ETF FoFs were completely stopped in October. However, it is worth noting that existing systematic investment plans (SIPs) and withdrawals from these FoFs continued seamlessly.

Banerjee stated that despite the recent changes, the exchange trading route remains open. With the gold FoF sector holding assets of about ₹63,000 crore—around a third of the ₹1.86 lakh crore held across all gold ETFs—one could argue that there continues to be robust demand for gold ETF investments.

What Does the Future Hold?

October's inflows may indicate that many investors are taking advantage of lower gold prices, which had dropped nearly 10% over the previous two months, effectively creating a buying opportunity. However, it is essential to approach these figures with caution, as they are estimates based on assets under management (AUM). The official statistics from the Association of Mutual Funds in India (AMFI), due around November 10, are expected to provide a more accurate representation of the situation.

In fact, gold ETF investor participation was already on the rise before the restrictions were enforced. For instance, the number of gold ETF folios jumped by approximately 140,000 in September, reaching a total of 12.70 million. This contrasts sharply with the mere 4,000 additions recorded in August. Over the past two years, folios have more than doubled from around 5.50 million to over 12.50 million.

Future data on folios and subsequent inflow trends in November will be critical in establishing whether new investors continue to favor direct ETFs following the suspension of fresh FoF subscriptions. Banerjee emphasized that metrics such as gold ETF folios, new unit creations, and trading volumes will provide a clearer insight into the investment landscape.

In conclusion, while October's inflows illustrate that restrictions did not hinder the influx of funds into gold ETFs, additional months of data will be necessary to confirm if a substantial shift toward direct ETFs is indeed taking place or if the current trends merely reflect increased buying during a price adjustment.