3 Gold ETFs to Add Your 2026 Watchlist

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 146% over the last five years, rising from around Rs 50,000 to Rs 124,000, and 65% over the previous year till 19 November 2025, 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, its inverse relationship with equities has been weakening as investor behaviour shifts toward treating gold as a mainstream asset class amid consistent geopolitical threats.

This has been one of the drivers of gold's rally, which picked up momentum after Europe froze Russia's reserves. This highlighted the risk of such a move, forcing central banks to increase purchases and diversify beyond the US dollar.

Global central banks have purchased 1,000 tonnes per year over the past three years, ending in 2024, and 634 tonnes in 2025 till September per the World Gold Council.

Gold: Investment Demand and Central Bank Buying

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

Reasons Why Gold is Near Record Highs

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

Apart from this, gold prices also got support from consumption and investment demand. The total assets under management (AUM) of global gold ETFs reached a record high of US$ 502.8 billion (bn) in October.

ETF holdings increased for five consecutive months in October, rising 55 tonnes to 3,893 tonnes. All of these factors have contributed to gold's outperformance as an asset class.

ETF Flows Fueling the Gold Rally

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 their prices track the domestic gold market.

Then comes the Gold Savings Funds for those who prefer flexibility. These are basically fund-of-funds that invest 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.

Accessibility is another advantage. Gold ETFs can't be purchased through Systematic Investment Plans (SIPs). In contrast, Gold Savings Funds allow investors to build exposure gradually using SIPs, starting with as little 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 it for more than 12 months, it will be treated as a long-term capital gain and taxed at 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 diversification to portfolios.

This editorial examines 3 gold ETFs for investors seeking to incorporate gold into their investment strategy.

Gold ETFs Based on the Last 5 Years Return

(Source: ACE MF, data collated by PersonalFN Research)

Let us explore the 3 Gold ETFs for 2026 that you can explore in 2026...

#1 LIC MF Gold ETF

Backed by LIC's brand, LIC MF Gold ETF enjoys strong recall and trust. The scheme is 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% (annualised) 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 8.59 bn as of 31 October 2025.

Being an ETF, its expense ratio is just 0.41%. Currently, the scheme allocates 97.86% to gold, with the remaining balance invested in cash.

The fund closely mirrors gold's movements, as intended. Its standard deviation of 13.74 is only marginally higher than gold's 13.29, indicating the fund has exhibited slightly more price volatility than gold itself.

The fund's Sharpe ratio of 1.74, compared to gold's 1.81, suggests that risk-adjusted returns are nearly equal. The Sortino ratio of 3.54 versus 3.60 for gold indicates that downside risk is well managed.

#2 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 4.27 bn, but it is relatively costly with an expense ratio of 0.55%.

The scheme's current allocation is 98.48% 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 13.48 is only marginally higher than that of gold, at 13.29.

Its Sharpe ratio of 1.74, compared to gold's 1.81, suggests that risk-adjusted returns are nearly equal. The Sortino ratio of 4.01 versus 3.6 for gold indicates that downside risk is also well managed.

#3 Axis Gold ETF

This ETF is managed by Axis Mutual Fund. Its investment objective is also to generate returns in line with gold's performance.

Axis Gold ETF is one of the most liquid, with an AUM of Rs 28.99 bn and an expense ratio of 0.56%.

Currently, the fund asset allocation is 98.31% in gold, 1.49% in cash and cash equivalents, and 0.2% in debt. The fund's standard deviation of 12.68 is lower than gold's (13.29), indicating lower volatility.

Its Sharpe ratio is 1.82, compared to gold's 1.81, indicating almost equal risk-adjusted returns. Similarly, the Sortino ratio of 3.63 versus 3.6 for gold suggests the fund has marginally outperformed in managing downside risk.

Here's what toy should consider when selecting gold ETFs/gold mutual funds

• Investment Horizon: Every investment should be made with the investment horizon in mind. A longer investment horizon helps even out risk and volatility, and vice versa. Similarly, due to gold's higher volatility, large drawdowns, and extended periods of consolidation, it is more suited to long-term investment (5-10-year horizon), just like equities.
• Low Tracking Error: The degree to which a fund's returns track its benchmark (in this case, gold) on each trading day is tracking error. A lower tracking error indicates that the fund is closely tracking gold prices. A high tracking error means you're paying more than the gold is worth, making it riskier to invest in. Therefore, the lower the error, the better.
• Expense Ratio: Compare expense ratios of different gold mutual funds. Lower expense ratios mean higher returns for investors. This should be checked alongside other metrics, such as performance and standard deviation. It's because a scheme with a higher expense ratio can still beat one with a lower expense ratio.
• 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.

As an asset class, gold's role in a portfolio is now recognised as more than just a financial hedge.

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, Axis stand out for its 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 17 November 2025
Do note that past performance is not an indicator of future returns.
The securities quoted are for illustration only and are not recommended.

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