Gold exchange-traded funds in India recorded their first monthly outflow in 13 months during May, as investors pulled money from the asset class even as geopolitical tensions and market volatility pushed prices to record highs. The data, released by the Association of Mutual Funds in India (AMFI), shows net outflows of Rs 725 crore from gold ETFs.
The reversal is notable because it comes at a time when gold’s traditional investment case appears stronger than ever. Escalating tensions in the Middle East, uncertainty around global growth, inflation concerns and volatile equity markets would ordinarily be expected to boost demand for safe-haven assets. Instead, investors appear to have taken a different route.
A sudden stop after a record run
Earlier this year, gold ETFs attracted a record Rs 24,039 crore in January. Inflows then slowed to Rs 5,254 crore in February, Rs 2,265 crore in March and Rs 3,040 crore in April.
The trend finally turned negative in May.
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The slowdown was driven by a combination of weaker fresh investments and rising redemptions. Gross inflows nearly halved to Rs 2,604 crore from Rs 5,093 crore in April, while redemptions jumped to Rs 3,329 crore from Rs 2,053 crore.
“An interesting trend was seen in Gold ETFs, which witnessed an outflow after 12 consecutive months of positive inflows, during which Gold ETFs attracted more than Rs 70,000 crore since May 2025,” said Feroze Azeez, Joint CEO of Anand Rathi Wealth. “With gold prices at raised levels, the government’s request to not purchase the gold and some AMCs stopping inflows in the ETF, investors seem to be taking a more practical view.”
“After a sharp rally, future returns may not look as attractive as they did over the past year,” he added.
Rising AUM masks weak investor demand
Interestingly, gold ETF assets under management continued to rise despite the outflows. The category’s AUM increased to Rs 1.85 lakh crore at the end of May from Rs 1.78 lakh crore in April. However, the Rs 6,460 crore increase was not driven by fresh money. It reflected mark-to-market gains as gold prices continued to appreciate during the month.
Investor participation also declined. Gold ETF folios fell by 1.34 lakh during the month to 1.23 crore, indicating that some investors exited the category entirely rather than merely trimming allocations.
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“The folio decline in gold ETFs is almost certainly retail investors redeploying into equity or multi-asset strategies amid an equity market correction which counterintuitively becomes a buy-on-dip opportunity for that cohort,” said Aditya Mulki, CEO of Navi AMC. Mulki also noted that multi-asset allocation funds which include a gold component recorded positive inflows of Rs 3,929 crore for the 57th consecutive month. “Investors are not abandoning gold exposure, they are accessing it through diversified wrappers rather than pure-play ETFs. That is a structural evolution in how Indian investors think about portfolio construction,” he added.
Central banks keep buying, long-term story intact
Despite the outflow, market participants remain constructive on gold’s long-term outlook. Prashasta Seth, CEO of Prudent Investment Managers LLP, highlighted gold’s role as protection against geopolitical risk, currency movements, inflation, and overall market uncertainty. “The recent ETF outflows do not change our outlook because the underlying fundamentals for gold remain strong. Central banks have been active buyers of gold at more than 1,000 tonnes per year, while declining interest rates globally could potentially add to gold’s appeal,” he said.
Sidharth Sogani Jain, Founder, CEO and Fund Manager at Blue Aster Capital and CREBACO Global, believes the outflow should be seen in a broader context. “Central banks are not trading gold, they are accumulating it as a long-term economic strategy. That buying is not going to stop because of a monthly outflow. It quietly keeps a floor under gold demand. Once the SpaceX IPO buzz fades and equity euphoria cools, retail money will find its way back to gold,” he said.
The May outflow marks a rare moment where short-term profit-taking has outweighed the safe-haven narrative. But with central banks still accumulating and diversified fund flows holding steady, the broader shift in how Indians invest in gold may be more structural than a simple retreat.