Gold ETFs Saw Record Inflows in December, But Experts Warn Against Over-Allocation

Gold exchange-traded funds have witnessed significant net inflows in December 2025 worth Rs 11,646 crore, the highest monthly inflow on record, according to data released by the Association of Mutual Funds in India (AMFI). The surge was driven by sustained demand for gold-backed products amid elevated macro uncertainty and intermittent risk-off sentiment, according to experts.

“Strong price momentum in gold through 2025, coupled with heightened safe-haven demand, continued to support investor interest in the segment,” says Himanshu Srivastava, Principal Research, Morningstar Investment Research India.

Indian investors have increasingly turned to Gold ETFs as a regulated, liquid, and cost-efficient alternative to physical gold, particularly during periods of volatility across equity and bond markets.

“Not only Gold ETFs but hybrid funds also attracted a huge Rs 10,756 crore. This investment underlines a clear shift towards diversification and downside protection,” says Ankur Punj, MD – Business Head, Equirus Wealth.

The sharp rise in domestic gold prices over recent months has further reinforced investor confidence in gold-linked products, prompting fresh allocations into ETFs. However, as per historical data, investors should be cautious of adding gold beyond a certain limit to their portfolio.

When you compare gold with equities, especially over longer periods, the contrast becomes clearer. According to FundsIndia’s data, equities have performed better than gold in terms of generating inflation-beating returns. In fact,  the Nifty 50 TRI has a far lower chance of delivering negative returns over extended horizons than gold. Equities are tied to earnings, growth, and productivity, forces that tend to compound with time. (Read more here:  Gold’s Big Run: Why Investors Must Resist The Urge To Overinvest)

“Despite gold’s recent stellar performance, history reminds us that gold is a cyclical asset. Periods of rapid gains were often followed by long, flat stretches," says Ashika N, Manager, Mutual Fund Research, FundsIndia.

But this doesn’t mean gold has no place in your portfolio. It absolutely does, but as a cushion, not the core, believe experts. Domestically, investors increasingly viewed gold as an effective counterbalance to equity exposure, especially amid mixed global growth signals and currency fluctuations.

To conclude, December’s AMFI data highlights a clear investor tilt towards safety and diversification, with gold ETFs gaining traction amid global uncertainty. But those investors who have made this move by just looking at the returns need to be cautious.