Gold ETFs or EGRs: Where to invest as PM calls for a one-year pause on purchases?

Prime Minister Narendra Modi’s appeal to citizens to defer non-essential gold buying for a year is about protecting India’s external balances and is not a comment on yellow metal as an asset class. Since India imports most of its gold in dollars, heavy imports widen the trade deficit and increase pressure on the rupee, especially at a time when crude prices remain elevated.

“This is unlikely to reduce India’s overall appetite for gold,” “Amit Pabari, founder and CEO of CRForex said.

“India sits atop an estimated 30,000 tonnes of household gold, the world’s largest private stockpile. Recycling even 1 percent of it could replace 300 tonnes of annual imports, saving billions in forex at a time when PM Modi has called for national economic restraint,” said Dr Renisha Chainani, head of Research at Augmont.

“Simultaneously, investing in gold in a digital way offers full price participation without triggering a single dollar of import demand.”

Gold shift

Today, investors’ demand is shifting from physical ownership to financial ownership through instruments such as gold ETFs and electronic gold receipts (EGRs). So whether investors choose ETFs or EGRs, the underlying exposure to gold remains the same, only the form of holding changes.

NS Ramaswamy, head of commodity and CRM , Ventura, said, “Digital alternatives, like gold ETFs and EGRs, continue. Conversion to physical gold through EGR remains an attractive bet compared to a Gold ETF. EGR is directly linked to physical stocks in vaults. GST applies only to the physical delivery conversion.”

Both ETFs and EGRs are “financialised” gold, thereby reducing the immediate pressure to physically hoard. Both are SEBI-regulated and safer than unregulated “digital gold” platforms.

Pabari said, “From a macro perspective, the broader bullish theme for gold still remains intact. Central banks globally, including the Reserve Bank of India, continue to accumulate gold as part of diversification away from dollar dependence and the larger de-dollarisation trend. In fact, between October 2025 and March 2026, RBI brought home over 104 metric tonnes of gold, reflecting continued strategic preference for the metal,” Pabari said.

Gold also continues to serve as an effective hedge for Indian investors, as any rupee weakness driven by rising imports or global uncertainty typically pushes domestic gold higher.

What investors must know

In Q1 2026, UPI gold transactions nearly quadrupled year-on-year to Rs 70 billion, while recycled scrap supply rose 20 percent. “The smart investor’s answer to India’s gold dilemma is not to stop buying gold, it is to recycle what exists and invest in what doesn’t cross a border,” Chainani said.

Besides, a liquid way to profit from gold price movements is through a gold ETF if there is no need for physical gold. “We don’t expect any dent in the domestic retail demand as investors are seeking opportunities to hoard gold on every dip,” Ramaswamy said.

Pabari said, for investors, the decision between gold ETFs and EGRs should depend more on liquidity, taxation, ease of trading, and investment convenience rather than on expectations of weaker gold demand.

Sandip Raichura, CEO of Retail Broking and Distribution & Director, PL Capital, said, “Gold ETFs remain one of the most efficient and investor-friendly ways to invest in gold because of their simplicity, liquidity, transparency, and relatively straightforward taxation framework.”

For investors who do not necessarily require physical delivery, ETFs offer a convenient and low-hassle route to gain exposure to gold, while still retaining the flexibility to convert holdings into physical gold if needed.

People are unlikely to stop buying gold — the ownership pattern is simply becoming more digital and financialised, Pabari said.

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