Equity Market Weakness Potentially Driving Investors Towards Gold ETFs, Says WGC

Gold exchange-traded funds (ETFs) listed in India attracted $496.2 million in September 2026, nearly double the $256.20 million inflow recorded in August, according to World Gold Council (WGC). The WGC said the weakness in domestic equities could be one of the reasons behind the rise in inflows in gold ETFs.

In its Gold ETF Flows report for September 2026, dated October 7, the WGC said, “Inflows continued into Indian funds, potentially supported by a pullback in domestic equities, opportunistic dip buying and increased demand for portfolio diversification.”

Indian gold ETFs added 3.12 tonnes in September 2026, taking inflows in the July-September quarter to $889.40 million. Inflows for 2026 so far stand at $4.71 billion, equivalent to 29.40 tonnes. India ranks third globally in gold ETF inflows this year, behind the UK and China, but ahead of the US.

Assets held by India-listed gold ETFs have risen 31 per cent since December to 124.40 tonnes. Twenty of the 26 funds recorded inflows in September, with Nippon India ETF Gold BeES leading the pack at $125.9 million.

The rise in gold ETF inflows comes as domestic equities have struggled. The Nifty 50 has fallen 8.34 per cent over nine weeks, although it closed higher this week to end its eight-week losing streak. The Nifty 500 is down 7.80 per cent over the same period.

Foreign portfolio investors (FPIs) have also continued to sell Indian equities. They offloaded shares worth Rs 44,166 crore in October through October 9, taking their net selling for 2026 to a record Rs 3,04,468 crore. In September, they had sold Rs 35,861 crore worth of equities.

Brent crude remained largely between $100 and $110 a barrel for much of September and the first week of October, while the US 10-year Treasury yield has crossed 5.20 per cent. Minutes of the Federal Open Market Committee (FOMC) meeting also indicated the possibility of another US rate hike. The rupee, meanwhile, fell to fresh record lows near Rs 97 against the dollar on October 9.

Gold ETF Inflows: Is The Buying A Safe-Haven Trade

Kaynat Chainwala, assistant vice president for commodity research at Kotak Neo, said the latest inflows appear to reflect long-term portfolio diversification rather than investors rushing to gold to protect themselves from falling equity markets.

“The current evidence points more toward long-term diversification than short-term safe-haven buying,” she said.

Chainwala said gold prices would have risen alongside the equity sell-off if investors were primarily moving towards the precious metal for safety. Instead, gold prices declined through much of the correction.

WGC data shows that the average gold price in September stood at around $4,325 an ounce, roughly 14 per cent below the peak recorded in February.

According to Chainwala, investors who continued to hold gold through the correction appear to be looking beyond short-term market movements. Reserve diversification, concerns over the long-term value of the dollar and geopolitical fragmentation remain key reasons for holding the metal. She added that institutional and long-term investors are driving the buying more than retail investors.

“Retail participation tends to be momentum-driven and typically fades during sharp corrections,” she said.

Ajit Mishra, senior vice president – Research at Religare Broking, said gold serves both as a long-term portfolio diversifier and a short-term safe haven, though its role as a diversifier remains more important.

“Gold is serving both purposes, but its role as a long-term portfolio diversifier remains more important than its use as a short-term safe haven,” he said.

Mishra said gold tends to attract demand during periods of equity market volatility, geopolitical uncertainty and currency fluctuations as investors look to protect their purchasing power. However, rising bond yields and a stronger dollar can also trigger sharp corrections in gold prices.

“From a portfolio perspective, gold offers diversification because its performance drivers differ from those of equities and bonds,” he said, adding that investors should treat gold as a strategic allocation rather than a tactical bet, with measured exposure alongside equities and fixed income.

Mishra said both retail and institutional investors are contributing to gold ETF demand, with institutional and large investors playing an increasingly important role in global flows.

In India, retail participation has also supported demand as investors increasingly use gold for portfolio diversification, wealth preservation and protection against uncertainty, he said.

Gold Prices: Three Factors To Watch Over Next 6-12 Months

Chainwala identified real yields, the dollar and central bank buying as the key factors that could determine gold's direction over the next six to 12 months.

Real yields are the most important variable, she said. The yield on the US 10-year Treasury Inflation-Protected Securities (TIPS) rose from 2.46 per cent in early September to 2.99 per cent, its highest level since 2008. It stood at 2.89 per cent on October 9.

Higher real yields increase the opportunity cost of holding gold, which does not pay interest. A sustained rise in yields could, therefore, limit gains in the precious metal.

The dollar is the second factor. A retreat from its 18-month highs could support gold prices by making the metal cheaper for buyers using other currencies. Central bank buying is the third factor to watch out for. The People’s Bank of China (PBoC) extended its gold-buying streak to 23 consecutive months in September, according to Chainwala. However, she cautioned that continued central bank demand alone may not be enough to trigger a sharp rally if yields and the dollar remain firm.

Mishra said gold prices and ETF inflows over the next six to 12 months will largely depend on US Federal Reserve policy, real bond yields, movements in the dollar and geopolitical uncertainty.

“Any slowdown in economic growth, easing of monetary policy or escalation of global conflicts could strengthen safe-haven demand,” he said. Continued central bank purchases and investor diversification could provide further support to prices and inflows.

However, persistently high interest rates, a stronger dollar and easing geopolitical tensions could trigger profit-booking and moderate gold ETF inflows, Mishra said.

“Without a macro turnaround in yields and the dollar, that floor may limit downside but is unlikely to drive a rapid rally on its own,” she added.