Net inflows into gold ETFs dipped sharply in July, falling nearly 55% month-on-month to ₹1,559 crore, according to data released by the Association of Mutual Funds in India (Amfi). Gold ETFs saw an outflow of ₹725 crore in May 2026 before flows turned positive in June, with inflows worth ₹3,443 crore.
The decline comes after an extended rally that pushed gold ETF assets under management to record highs, followed by a sharp market correction that prompted retail investors to pause fresh allocations, according to industry experts.
Profit-booking and leverage
The sudden decline in flows points to a shift from aggressive momentum-chasing to cautious profit-booking. Following a major price surge in gold ETFs between April 2020 and early 2026, gold and silver prices corrected significantly, down nearly 30% and 50% from their peak levels, respectively.
According to Navneet Damani, head of research for commodities and currency at Motilal Oswal Financial Services, retail participation is heavily tied to price momentum.
"Whenever something is moving, investors try to jump in to chase that. And when prices start to correct, the traction or the kind of flows which come into any kind of segment starts to pause," Damani explained, noting that many investors paused SIPs as prices retreated.
Vikram Dhawan, head commodities and fund manager at Nippon India Mutual Fund, attributed the pullback to profit-taking and the unwinding of speculative positions.
"What happened initially in 2026 was profit-taking, which snowballed into huge volatility, partly because a lot of leverage bets had been taken in gold and silver in overseas markets," Dhawan said.
He noted that higher oil prices and rising global bond yields added macro headwinds, driving tactical capital out.
Central bank demand
Despite the temporary slowdown in retail flows, market experts maintain a constructive long-term outlook for precious metals.
Damani expects a V-shaped recovery in international gold prices, targeting $5,500 to $5,700 per ounce over the next 12 to 24 months. "De-dollarization and treasuries moving away from US Treasury bonds to gold as an asset will be the larger theme," Damani stated.
Dhawan similarly highlighted that portfolio diversification will remain the primary driver for gold ETF adoption.
"The long-term driver for gold ETFs is asset allocation. Tactical money will come and go, but long-term flows will be driven by demand for asset allocation and risk-weighted returns," Dhawan noted.
Gold portfolios are intended to hedge and act as a shock absorber. Investors should maintain a disciplined 10-15% allocation to precious metals, rather than attempting to time price tops and bottoms.
Accumulating on dips via SIPs can help investors maintain a diversified portfolio while avoiding the risks of trying to predict short-term price movements.