Precious metal funds inflows at all-time high in June; experts favour blended approach

Net investments into silver and gold exchange-traded funds (ETFs) zoomed to a record high in June, as equity mutual fund inflows jumped 24 percent from the previous month.

Gold ETFs saw net buying of Rs 2,081 crore and silver funds Rs 2,005 crore, taking the monthly total to an all-time high of Rs 4,085 crore, data released by industry body the Association of Mutual Funds in India (AMFI) shows. For the month, equity mutual fund inflows rose to Rs 23,587 crore.

India’s first gold ETF was launched in March 2007 and silver in January 2022. Gold ETFs now have assets worth Rs 64,777.22 crore and silver Rs 20,286.59 crore, the data, released on July 9, shows.

The growth of silver ETFs has outpaced that of gold ETFs in the past year, as yellow metal prices surged way ahead of the white metal.

Experts see continued traction in precious metal ETFs, as investors look to diversify beyond traditional equity and fixed income in an increasingly complex macro environment.

Lure of precious metals

The strong June inflows into precious metal ETFs can be attributed to a combination of macroeconomic and market-driven factors.

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“Macroeconomic uncertainty remains a key driver, with investors turning to hedging assets like gold and silver amid persistent concerns around global growth, geopolitical tensions and interest rate and policy changes by major central banks. These uncertainties have prompted a cautious shift in asset allocation toward perceived safe-haven instruments,” said Nehal Meshram, senior analyst – manager research, Morningstar Investment Research India.

A weaker US dollar and expectations of limited rate cuts have boosted the appeal of non-yielding assets such as gold and silver.

 

Factors driving the price rally

Over the past year, gold has rallied around 40 percent in dollar terms, while silver has gained close to 19 percent.

“Gold ETFs recorded strong inflows with a seven-time monthly surge, reflecting investor interest in gold, as due to global uncertainty and the spike also comes amid the absence of Sovereign Gold Bond issuances over the past year, prompting investors to turn to gold ETFs as an alternative exposure route,” said Feroze Azeez, deputy chief executive Officer, Anand Rathi Wealth.

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With inflation staying firm in many economies, investors see precious metals as a way to preserve value. With equities and bonds showing mixed trends, gold and silver are being used for diversification and portfolio stability.

According to Trivesh D, chief operating officer at Tradejini, silver funds are getting attention not just as a precious metal but also because its industrial use, from solar panels to electronics, is boosting demand and price momentum.

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Gold vs silver debate

According to Suranjana Borthakur, Head of Distribution & Strategic Alliances, Mirae Asset Investment Managers (India), gold continues to be the dominant anchor in investor portfolios.

“Silver, meanwhile, has gained traction primarily due to strong industrial demand — particularly from clean energy, electronics, and AI-driven manufacturing sectors, where it plays a critical role,” Borthakur said.

From an allocation standpoint, both metals bring distinct advantages.

“Gold offers stability and proven defensive characteristics, while silver provides cyclical upside tied to industrial growth. A blended approach allows investors to harness the strengths of both — with gold helping cushion downside risk and silver offering potential for growth-oriented participation,” Borthakur said.

US President Donald Trump 10 percent additional tariff threat to BRICS countries and allies is another factor adding to gold’s upside. India is one of the founding members of BRICS. All this means that while gold remains the safer hedge in rough times, silver has room to catch up with industrial growth.

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“Going forward, investors can stay invested in both but should know that gold remains the more stable hedge in volatile times, while silver may stay more sensitive to industrial trends and short-term global cues,” Trivesh D said.