WGC Report: ETFs Outshine Coins as Indian Investors Pivot to Paper Gold Ahead of Diwali

Buying gold coins and bars during Diwali and Dhanteras has been a deep-rooted tradition in India. It is believed that buying gold coins and bars on the auspicious occasion invites wealth, prosperity, and financial security. Additionally, it is also a traditional way of adding gold to portfolios to create a hedge against uncertain times.

However, ahead of Diwali this year, a report by the World Gold Council (WGC) has shown that gold buyers in India are increasingly pivoting towards Gold Exchange Traded Funds (ETFs), and demand for bars and coins is falling.

Bar and Coin Demand Declines In Q3 2026

In India, gold coin and bar demand witnessed a steep decline as demand fell by 40 per cent year on year to 55 tonnes in Q3 2026, compared to 91.6 tonnes in Q3 2025. Notably, India accounted for 60 per cent of the global year-on-year decline. Investors responded closely to the gold price during the quarter.

The report showed that globally too, the demand for gold coins and bars dropped 19 per cent year on year to 268 tonnes in the third quarter of 2026 and reached a four-year low. One of the key reasons behind the decline was investors remaining on the sidelines as they awaited a clearer price trend to emerge. Other factors included gold prices broadly trading within a range and expectations for US interest rates to stay higher for longer, which made physical gold less lucrative.

Gold ETF Demand On The Up and Up

In stark contrast to the decline in demand for physical gold, gold ETFs staged a strong recovery in Q3 as demand strengthened to 5.3 tonnes from 3.6 tonnes in Q2 2026 in India. Globally, Gold ETF demand also reversed second-quarter outflows by adding 211 tonnes globally. This robust buying lifted global holdings to a record 4,256 tonnes and generated a record US$31 billion of quarterly inflows. Asian funds recorded their third consecutive quarter of inflows, with Indian funds attracting 6 tonnes of demand. In Q3, ETF demand strengthened to 5.3 tonnes from 3.6 tonnes in Q2 2026 in India

Additionally, data from the Association of Mutual Funds in India (Amfi) also shows that in September 2026 alone, Indian Gold ETFs attracted Rs 4,451 crore in net inflows, marking their highest monthly intake of the financial year and a 71 per cent jump from the Rs 2,597 crore recorded in August 2026.

A combination of heightened geopolitical uncertainty in West Asia, persistent inflation concerns, and investors proactively using price dips to build positions in financialised gold rather than purchasing physical coins or bars drove the inflows, reflecting a growing appetite for financialised gold over physical assets.

The Catalyst Behind the Shift

The transition from physical coins to paper gold in India is being driven by changing investor preferences and market dynamics. Record high prices have constrained affordability, making the fractional ownership offered by digital gold and ETFs highly attractive. Avoiding the storage costs, making charges, and security risks associated with physical gold has also made ETFs a more practical choice for modern retail investors.

WGC’s Key Projections For Q4 2026

Looking into the fourth quarter, global demand across gold ETFs, Western bar and coin, derivatives, and over-the-counter activity is expected to reflect competing macro forces. Higher policy rates, rising bond yields, and a stronger US dollar could weigh on demand, while fiscal concerns, inflation risks, geopolitics, and financial market stress may provide continued support.

While bar and coin demand has slowed markedly, it is projected to remain relatively resilient in the upcoming quarter. WGC expects a modest full-year decline globally, with renewed Q4 strength requiring either an external catalyst or a clear directional move in the gold price.

For India, a late festive calendar shifted some demand that would normally fall in Q3 into Q4. This calendar shift, combined with the traditional Dhanteras buying rush, could offer a seasonal boost to physical gold demand, though the overarching pivot towards ETFs and digital alternatives is expected to remain a defining theme of the investment landscape.