Gold ETF Inflows Remain Strong Despite MF Subscription Curbs; Did Investors Shift To Direct ETFs?

Gold exchange-traded funds (ETFs) continued to attract investor money in the second half of October, even after mutual fund houses suspended fresh subscriptions to gold ETF fund of funds (FoFs) from October 16, 2026. This suggests that investors may have shifted to direct gold ETF investments after the restrictions, but more data is needed to confirm whether this is a lasting trend.

The World Gold Council’s (WGC) mid-October estimate put Indian gold ETF inflows at $181 million, or around Rs 1,700 crore according to current exchange rate, in the first half of the month. The full-month October report subsequently recorded inflows of $380.50 million, or around Rs 3,574 crore, implying that another $199.5 million, or around Rs 1,874 crore, came in during the second half.

The figures suggest that the suspension of fresh FoF subscriptions did not lead to a sharp fall in overall gold ETF inflows. However, the aggregate data does not reveal how much of the second-half money came through direct ETF purchases and how much through existing FoF investments.

Anindya Banerjee, head of currency and commodity research at Kotak Neo, said the October figures offer an early indication of investors moving towards the direct ETF route. “The October data does point to a shift towards the direct ETF route, though it is an early and partial signal rather than a settled trend. The suspension of fresh FoF subscriptions took effect from October 16, which makes the first half of the month the ‘before’ and the second half the ‘after’,” Banerjee said.

He said that the differential between the first fortnight inflow and the second fortnight inflow suggests that the latter saw a broadly similar amount of money coming in. The pace of inflows, therefore, did not appear to weaken after fresh FoF subscriptions were stopped, he added.

Did Investors Turn To Direct Gold ETFs

Investors can invest in gold ETFs by buying units on stock exchanges, directly creating units with asset management companies (AMCs) for investments above Rs 25 crore, or investing through FoFs, which put money into existing gold ETFs.

The direct investment route for large investors was capped in June, while fresh investments in gold ETF FoFs were stopped in October. However, existing FoF systematic investment plans (SIPs) and withdrawals continued as usual.

Banerjee said the exchange route remained available after the restrictions. He added that gold FoFs had assets of about Rs 63,000 crore, roughly a third of the Rs 1.86 lakh crore held across gold ETFs.

Continued inflows despite the restrictions suggest that exchange-based demand was strong, although the data does not establish that all the incremental money shifted to direct ETFs.

He also cautioned that the October figures should be treated as an early signal. Gold prices had corrected close to 10 per cent over two months, which may have encouraged investors to buy the dip. Further, the October figures are estimates derived from assets under management (AUM). Official data from the Association of Mutual Funds in India (Amfi), expected around November 10, should provide a clearer picture.

What Data Will Confirm A Shift

Gold ETF investor participation had already been rising before the subscription curbs. Banerjee said gold ETF folios increased by around 140,000 in September to 12.70 million, compared to only about 4,000 additions in August. Over two years, the number of folios had more than doubled from around 5.50 million to over 12.50 million.

The October folio numbers and November flow data will be important in assessing whether new investors continued to enter gold ETFs through the exchange route after fresh FoF subscriptions were suspended.

Banerjee said rising folios alongside continued restrictions on fresh FoF investments would offer stronger evidence of investors choosing direct ETFs. Trading volumes and unit creations would also help establish whether the shift is taking place.

He said overall demat account additions should not be used as an indicator, as these are largely driven by initial public offerings (IPOs) and equity market activity. Gold ETF folios, new unit creations and trading volumes would give a clearer picture.

For now, October’s inflows show that the restrictions did not stop money from flowing into gold ETFs. However, it will take a few more months to determine whether investors are shifting to direct ETFs or simply buying more gold during a price correction.

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