Explainer: What is Gold ETF and why investors are choosing it over Physical Gold

February 24, 2026

What is a Gold ETF?

A Gold Exchange Traded Fund (ETF) is a passively managed mutual fund that tracks the domestic price of physical gold. Traded on stock exchanges like shares, these funds allow investors to gain exposure to gold price movements in electronic or dematerialized form without the need for physical storage, security risks, or high making charges.

What one unit of Gold ETF represents?

In India, one unit of a Gold ETF generally represents 1 gram of gold. These units are traded on major stock exchanges like the NSE and BSE, just like company shares.

Gold ETF hits record high! Why?

India is witnessing a sharp rise in investments in Gold Exchange-Traded Funds (ETFs), with total assets under management (AUM) touching nearly ₹1.84 lakh crore.

The surge comes on the back of a massive rally in physical gold prices, which have increased by around 90% over the past year.

The combined impact of rising prices, global uncertainty, and investor demand for safer assets has significantly strengthened gold’s position in investment portfolios.

Strong Rally in Physical Gold Prices

Over the last year, gold prices in the domestic market have climbed sharply, registering an increase of nearly 90%. The rally has been due to global economic uncertainties, geopolitical tensions, inflationary pressures, and central bank buying.

Gold has traditionally been considered a safe-haven asset during volatile market conditions. As equity markets fluctuate and inflation concerns persist, investors are increasingly turning to gold to preserve wealth.

Comparison between Gold ETF and Physical Gold 

How to Invest in Gold ETF? 

To invest in Gold ETFs, you must have a Demat and Trading account with a registered stockbroker. You can then search for various listed schemes such as Nippon India ETF Gold BeES, SBI Gold ETF, or HDFC Gold ETF and place a buy order during market hours.

If you do not have a Demat account, you can still gain gold exposure through Gold Fund of Funds (FoFs), which invest directly in these ETFs

Record Growth in Gold ETF Investments

The rise in gold prices has directly boosted investments in Gold ETFs. The total AUM of gold ETFs has surged to approximately ₹1.84 lakh crore, reflecting strong inflows from retail and institutional investors.

Gold ETFs allow investors to participate in gold price movements without the hassle of storing physical gold. The ease of trading through stock exchanges and lower storage risks make ETFs a convenient alternative to buying jewellery or bullion.

Why Investors Are Choosing Gold ETFs

Several factors are driving investor interest:

• Rising gold prices offering strong returns
• Market volatility pushing demand for safe assets
• Portfolio diversification strategies
• Easy liquidity and transparency in ETF investments
• No storage or making charges unlike physical gold

Experts believe that gold ETFs provide a cost-effective and secure way to invest in gold, especially for long-term financial planning.

Outlook for Gold Investments

With global uncertainties persisting and inflation concerns not fully easing, analysts expect gold to remain an important asset class in investment portfolios. Continued interest in gold-backed financial products such as ETFs and gold mutual funds is likely if price momentum sustains.