Gold prices have been declining due to the strengthening of the US dollar, rising bond yields, and the possibility of the US Federal Reserve raising interest rates. Gold prices have fallen by more than 6 per cent over the past month. This decline has also impacted Gold ETFs, which have fallen by more than 5 per cent during the same period. The correction in gold and Gold ETFs could present a buying opportunity for investors.
Experts believe that over the long term, continued purchases by central banks, rising geopolitical tensions, and inflation concerns are likely to keep gold attractive. Therefore, instead of making a lump-sum investment, investors should adopt a staggered investment strategy in Gold ETFs. According to experts, Gold ETFs can deliver returns of 18-20 per cent over the next one-and-a-half years.
Why are Gold ETFs under pressure?
Satish Dondapati, ETF Fund Manager at Kotak Mutual Fund, said that over the past month, gold prices have come under pressure due to the strengthening of the US dollar and rising US Treasury bond yields. Generally, gold and the US dollar move in opposite directions, so a stronger dollar puts pressure on gold prices. In addition, after gold delivered strong returns over the past few years, profit booking by investors also accelerated the decline. This has also affected the performance of Gold ETFs and investment inflows.
Ajay Kedia, Director at Kedia Advisory, said that gold prices have declined by around 26 per cent from their peak in January 2026, leading to profit booking and short-term ETF outflows. However, the fundamental factors supporting gold remain strong.
Gold ETFs have declined by up to 5 per cent over the past month. HDFC Gold ETF fell 5.22 per cent in a month to Rs 122.14 on July 12, SBI Gold ETF declined by around 3 per cent to Rs 121.90, while Nippon India Gold ETF fell around 3 per cent to Rs 118.18. During the same period, UTI Gold ETF, Tata Gold ETF, and Zerodha Gold ETF also declined by around 3 per cent.
Increase investments during the decline
Satish Dondapati said that Gold ETFs are an important part of any diversified investment portfolio, especially when economic uncertainty, inflation, and geopolitical tensions are elevated. Therefore, investors should not take hasty decisions based on the recent decline. Those who already hold Gold ETFs need not panic and exit their investments. Investors looking to increase exposure can gradually invest during price declines.
Amol Bansal, Founder and CEO of MyGold, said the recent decline in Gold ETFs should not be seen as a signal to exit investments because, after a prolonged rally in gold, profit booking and some consolidation in prices were natural. Bansal said Gold ETFs continue to be a good portfolio investment option, particularly through SIPs, STPs, or staggered buying. It would be better to avoid lump-sum investments amid the current volatility.
Kedia said this is not the right time to exit Gold ETFs. Instead, investors should gradually increase allocations during market declines. Central banks are steadily increasing their gold purchases. In addition, a trend towards reducing dependence on the US dollar is also becoming visible. Therefore, investors should continue investing in gold and Gold ETFs.
20% return in one-and-a-half years!
Kedia said gold has already corrected by around 26 per cent from its peak, while the second quarter (Q2) has been one of the weakest-performing periods in the past two decades. History shows that even after corrections of 40-45 per cent, gold has delivered strong long-term gains. We estimate that gold could generate returns of 18-20 per cent over the next 12-18 months. Gold ETFs could deliver similar returns. Therefore, disciplined SIP investments during periods of market weakness could be a better strategy.
According to World Gold Council (WGC) data, despite the recent volatility, global Gold ETF holdings increased by 18 tonnes during the first half of 2026, indicating that investors continue to have long-term confidence in gold. Experts say that continued gold purchases by central banks and the ongoing trend of de-dollarisation mean investors with a 12-18 month investment horizon should continue SIP investments in Gold ETFs. Making small additional investments during price declines could also prove beneficial.
Dondapati said long-term investors can gradually increase their investments in Gold ETFs. This would reduce the impact of short-term volatility and improve the prospects of better long-term returns. The key reasons include rising global debt, continued gold purchases by central banks, geopolitical tensions, uncertainty over global economic growth, and inflation risks.
According to Bansal, the long-term investment case for gold remains strong because it provides a hedge against inflation, currency weakness, and global uncertainties. Demand for gold continues to remain strong, but investors should allocate only around 10-15 per cent of their portfolio to gold, depending on their risk profile. Central banks are buying gold to diversify their foreign exchange reserves and reduce dependence on the US dollar, while retail investors use Gold ETFs as a transparent, liquid, and regulated way to invest in gold.
Gold ETF inflows decline
Net inflows into Gold ETFs have seen a sharp decline over the past few months. According to a Tata Mutual Fund report, Gold ETF flows in India have dropped significantly this year. Gold ETF inflows stood at $2,484.8 million in January, while instead of recording inflows, May witnessed outflows of $610 million. Net Gold ETF inflows stood at $5.652 billion in February, $2.44 billion in March, and $2.97 billion in April this year.
