4 Best Gold ETFs in India

Gold has long been an integral part of India's culture and investor psyche. Even now, in 2025, it remains a powerful hedge in uncertain times.

Gold has returned 131% over the last five years, rising from Rs 50,310 to Rs 116,166, and 54% over the last year, rising from Rs 75,213 per 10 gm.

The rally that began amid pandemic-driven uncertainty in 2020 gained momentum with Russia's invasion of Ukraine. And in 2025, Trump's tariffs further unsettled global economic conditions, allowing gold's run to sustain with only brief phases of consolidation.

Traditionally, Gold is well-known as a hedge against inflation and economic uncertainty. However, the ongoing rally is primarily driven by global central banks.

They have purchased 1,000 tonnes per year in the past three years, ending in 2024, and an additional 415 tonnes in the first half of 2025.

Central Banks Buying and Selling

These purchases align with de-dollarization, a trend where countries, particularly China, are diversifying their reserve holdings.

While the dollar continues to dominate global reserves, its share has gradually declined as central banks step up gold purchases.

Central Banks' Gold Accumulation in 2025

The US dollar's depreciation also makes gold more affordable for other countries to purchase, thereby supporting the global demand for the metal.

Additionally, Gold is also considered a symbol of prosperity and purity in Indian culture. It plays a central role in religious ceremonies, weddings, and festivals, such as Dussehra and Dhanteras during Diwali.

In these periods, gold demand surges as people purchase it for auspicious gifting, investment purposes, and to adorn deities.

This cultural reverence translates into a massive Indian gold market, making price fluctuations and performance as an asset class a topic of keen interest. All of these factors have contributed to the outperformance of gold as an asset class.

Gold exchange-traded funds (ETFs) also contributed to the rally. According to the World Gold Council, the total assets under management (AUM) of global gold ETFs reached a record high of US$ 407 bn.

ETF holdings continued to increase, rising 53 tonnes to 3,692 tonnes, the highest month-end value since July 2022 and 6% below the record of 3,929 tonnes in November 2020.

Gold ETFs: A Convenient Way to Invest in Gold

For generations, Indians have relied on gold as a store of value, a symbol of wealth, and a source of prosperity.

However, holding physical gold for investment purposes is not only costly but also challenging. This is because buying physical gold involves costs such as making charges and taxes, and you may not even receive the full value when you sell it.

That's where gold mutual funds step in, offering investors a safe and convenient way to invest without incurring any additional costs (except for regulatory and other related fees). They are insured, too, and you receive full value (net of charges) when you sell.

These funds mirror gold's price by investing either in Gold ETFs or directly in physical gold. The idea is straightforward: when gold prices rise, your fund reflects those gains.

Broadly, investors have two choices. The first is Gold ETFs, which trade on the stock exchange just like shares. Buying them requires a Demat and trading account, and the price movements track the domestic gold market.

For those who prefer flexibility, there are Gold Savings Funds. These operate as Fund-of-Funds, investing in Gold ETFs, but unlike ETFs, they don't require a Demat account. You can buy into them the same way you would with any regular mutual fund.

Another advantage is accessibility. While Gold ETFs can't be purchased through Systematic Investment Plan (SIPs), Gold Savings Funds allow investors to build exposure gradually, starting with amounts as low as Rs 500. Each unit is backed by 0.995 fine gold, ensuring credibility.

Liquidity is another plus. Like equity mutual funds, gold funds can be redeemed at any time, giving investors the flexibility to exit when needed.

From a tax perspective, if you hold gold for over 12 months, it will be considered a long-term capital gain and taxed at a rate of 12.5%. On the other hand, if you hold it for less than 12 months, it's taxed at slab rates.

For investors, gold mutual funds offer a balance: they retain the trust and cultural significance of gold, while providing the ease, transparency, and flexibility of a mutual fund. In today's volatile economic landscape, they remain an efficient way to add a layer of diversification to portfolios.

Similarly, this article examines the four gold ETFs suitable for investors seeking to incorporate gold into their investment strategy.

Gold ETFs Based on the Last 5 Years Return

Let us explore the top 4 contenders for the Gold ETFs in 2025 and analyse their strengths, weaknesses, and suitability for different investor profiles.

#1 LIC MF Gold ETF

Backed by the brand strength of LIC, LIC MF Gold ETF enjoys strong retail recall and trust. The scheme remains invested in physical gold regardless of the current price or its future outlook. It also strives to maintain an annual tracking error of below 2% (annualized) at all times.

The fund's investment strategy is to invest passively 95% of the scheme's corpus in gold and gold-related instruments. The scheme AUM stands at Rs 5.27 bn as of 31 August 2025.

Being an ETF, its expense ratio is just 0.41%. Currently, the scheme allocates 98.15% to gold, with the remaining balance invested in cash.

The fund closely mirrors the movement of gold, as intended. Its standard deviation of 13.73 is only marginally higher than gold's 13.32, indicating that the fund has exhibited only slightly more price volatility than the metal itself.

The Sharpe ratio of 1.58, compared to gold's 1.6, suggests that risk-adjusted returns are nearly equal. Similarly, the Sortino ratio of 3.54 versus 3.5 for gold shows that downside risks are well-managed, making the fund a near-perfect proxy for investing in gold.

#2 UTI MF Gold ETF

UTI Gold ETF s investment objective is to provide returns that, before expenses, match the performance and returns of gold. The scheme's tracking error of 0.07 (10-year) indicates that the fund's returns closely track gold's price movements, with only minor day-to-day deviations.

A tracking difference of -0.98 means that over time, the fund has delivered returns about 0.98% lower than those of gold itself, mainly due to expenses and the costs of managing the fund. The scheme AUM stands at Rs 21.56 bn as of 31 August 2025.

Currently, the scheme allocates 99.11% to gold. The fund is among the more liquid and well-known gold ETFs in India. However, it comes with a slightly higher expense ratio of 0.48%.

#3 Invesco India Gold ETF

Invesco Mutual Fund manages the Invesco India Gold ETF. The fund's investment strategy aims to closely align with the returns generated by investing in physical gold, subject to tracking error. Its AUM is 3.16 bn, but it is relatively costly with an expense ratio of 0.55%.

The scheme's current allocation is 98.43% in gold, and the remaining is held as cash and cash equivalents. This fund also closely mirrors the gold price, as intended. Its standard deviation of 13.51 is only marginally higher than that of gold, at 13.32.

The Sharpe ratio of 1.58, compared to gold's 1.6, suggests that risk-adjusted returns are nearly equal. Similarly, the Sortino ratio of 3.77 versus 3.5 for gold shows that downside risks are also well-managed.

#4 Axis Gold ETF

This ETF is managed by Axis Mutual Fund, adding to its suite of passive investment products. Its investment objective is also to generate returns that are in line with the performance of gold. After UTI Gold ETF, it's the most liquid with an AUM of Rs 20.84 bn.

Currently, the fund asset allocation is 98.42% in gold, 1.49% in cash and cash equivalents, and 0.09% in debt. This fund's standard deviation of 12.73 is lower than that of gold (13.32), indicating lower volatility compared to gold.

Its Sharpe ratio is 1.67, compared to gold's 1.6, indicating higher risk-adjusted returns than those of gold. Similarly, the Sortino ratio of 3.58 versus 3.5 for gold suggests the fund has marginally outperformed in managing downside risk.

Key Considerations for Selecting Gold Mutual Funds

• Investment Horizon: Gold, as an asset class, is well-suited for a long-term investment horizon, similar to that of equities. Ideally, a 5-10-year horizon can help you ride out market ups and downs and benefit from long-term gold price appreciation.
• Low Tracking Error: Tracking error measures how much the returns of a fund deviate from its benchmark (in this case, gold) on a day-to-day basis. A lower tracking error indicates that the fund is moving closely in line with gold prices. Thus, the lower the error is, the better it is.
• Expense Ratio: Compare expense ratios of different gold mutual funds. Lower expense ratios translate to higher returns for the investor.
• Fund Manager Style: You should choose gold ETFs that track gold prices passively, as well as actively managed funds that invest in gold ETFs and mining companies.
• Long-performance Track Record: Do note that past performance does not guarantee future returns. It can, however, provide valuable insights into a fund's consistency and risk profile.
• Suitability: Each asset class should be included in a portfolio based on its suitability. You need to determine why you want to invest in gold. Is it for capital appreciation, inflation protection, long-term exposure to gold, or portfolio diversification? Understanding your goals will help you choose a gold mutual fund.

Conclusion

Gold, as an asset class, has reaffirmed its role as both a cultural anchor and a financial hedge for Indian investors. With global central banks increasing their holdings, the dollar weakening, and geopolitical uncertainty persisting, the metal's long-term appeal remains intact.

For investors, Gold ETFs provide a transparent, cost-efficient, and liquid route to participate in this asset class without the hassles of owning physical gold.

Among the leading ETFs, UTI and Axis stand out for their liquidity and scale, LIC offers the comfort of brand trust, and Invesco provides a disciplined, albeit more costly, option.

The choice ultimately depends on an investor's horizon, risk appetite, and need for diversification.

But allocating a portion of your portfolio to gold through ETFs can help balance risk, preserve wealth, and participate in one of the most enduring investment stories in India.

Happy investing.

#Table Note: Data as of September 30, 2025
Do note that past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommended.
(Source: ACE MF, data collated by PersonalFN Research)

Disclaimer: This article is for information purposes only. It is not a recommendation and should not be treated as such.