India’s gold market update: Anticipating a festive boost

Significant growth in Indian gold ETF investments

Investor interest in Indian gold ETFs has remained strong since the taxation changes announced in the Union Budget in July, as evidenced by the notably higher inflows during this period. The strong gold price momentum and elevated geopolitical risk also contributed to inflows from investors seeking, higher returns. Anecdotal reports indicate an increase in retail investor participation. Our initial estimates based on partial information pointed to another positive month for Indian funds. And according to the Association of Mutual Funds in India (AMFI), September saw net inflows of INR12bn (~US$147mn), lower than the previous months record inflows (by 20%) but significantly higher than the average net inflows of INR 5.3bn (~US$63mn) in the first half of the year.

These sustained inflows and higher gold prices pushed up the cumulative assets under management (AUM) for Indian gold ETFs to a record INR398bn(~US$4.7bn), a 7% increase m/m and a 67% rise from a year ago, as per AMFI data. So far in 2024,⁷ net inflows into Indian gold ETFs have amounted to INR74bn(~US$879mn), a substantial increase from INR17bn in the same period last year. Collectively, these funds have added 10.3t of gold this year, bringing their total gold holdings to 52.6t, which represents a 29% y/y increase.

The steady inflow into Indian gold ETFs aligns with the global trend of ongoing investments in gold ETFs, driven by lower opportunity cost associated with interest rates and the US dollar, surging gold price, and demand for safe-haven assets.