gold etf

Gold and its cheaper brother silver have emerged as the best performing assets this year, far outpacing returns from the stock and crypto markets. The tremendous rise in gold in the year 2025 has attracted investors towards this market, and money is coming into exchange-traded funds (ETF) for the seventh consecutive month.

According to AMFI data, investors' interest in gold ETFs remained intact in November and a net investment of Rs 3,741 crore was recorded in it. This year, the best performing gold ETF has given returns of more than 72%, which has further increased its attractiveness for investors. But the question is, has this rise in gold ETFs and gold prices gone further than reality?

Why have prices increased?

In a Mint report, Akshat Garg, Research and Product Head, Choice Wealth, said that there is no doubt that the rise has been very strong and part of it is related to the market environment. Investors poured money into ETFs in anticipation of a cut in global interest rates and in search of safe investments, due to which gold prices rose faster than the normal base.

However, Garg also clarified that the demand environment and strong support still remains, because Central Banks are continuously buying gold and the US dollar remains weak. Due to weak dollar, gold becomes cheaper for those holding other currencies. Additionally, Central Banks are expected to cut interest rates, making non-interest bearing gold more attractive. So it is not a bubble, but yes, the rally has definitely added an additional momentum on top of a strong base.

Can the rise in gold ETFs continue?

Mint has quoted experts as saying that there is scope for further growth, but the pace may be a little moderate. Some of the main reasons supporting the purchase of gold and investment in gold ETFs are as follows.

1. Indications of cut in interest rates- Garg said clear signs of interest rate cuts or lower real returns could make gold and silver more attractive. Last week, the US Federal Reserve cut the rate by 25 basis points for the third time this year. Going forward, investors are expecting more loose monetary policy in America next year. In an interview with The Wall Street Journal on Friday, President Donald Trump talked about reducing rates aggressively and said that he expected the next Fed chair to take his advice on monetary policy. He named Kevin Hassett and Kevin Warsh as his choices to replace Jerome Powell.
2. Constant investment in ETF- Analysts at Choice Broking say that continuous inflow of money into gold ETFs can keep gold prices high, because with every new purchase the supply reduces and prices go up. According to the World Gold Council report, by 2025, investment in gold ETFs has increased to $ 378.7 million so far.
3. Weakness in US dollar- The dollar remained near a two-month low last week, making gold more attractive to foreign buyers. Experts believe that as long as the dollar remains weak, the demand for gold will remain strong.
4. Gold-silver ratio- The gold-silver ratio is close to its long-term average, which supports further gains. But if it comes towards the old level of 6062, then more fluctuations may be seen in prices, because silver may perform faster than gold.