India's gold exchange-traded funds (ETFs) witnessed their largest-ever monthly outflow in May, ending a 12-month streak of inflows as investors booked profits after a sharp rally in bullion prices and reassessed global interest rate expectations.
According to data released by the Association of Mutual Funds in India (AMFI), gold ETFs recorded net outflows of ₹725 crore in May, reversing net inflows of ₹3,040 crore in April. The pullback came after a year of uninterrupted inflows into the category.
"People must have probably booked the profits as well, given the fact that the gold prices have slightly moved up on account of the import duties," said Venkat Chalasani, Chief Executive of AMFI.
Despite the record outflows, assets under management (AUM) of gold ETFs rose nearly 4% month-on-month and almost tripled year-on-year to ₹1.85 lakh crore as of May-end, reflecting the strong appreciation in gold prices.
Profit booking ends
Analysts attributed the reversal to a combination of profit booking, a stronger US dollar and shifting expectations around US Federal Reserve rate cuts.
"Gold ETFs are under pressure because the market has shifted from inflation-hedge buying to rate-risk repricing," said Harshal Dasani, Business Head at INVasset PMS.
He noted that stronger-than-expected US non-farm payroll data has revived concerns that inflation may remain sticky, reducing the likelihood of aggressive rate cuts by the Federal Reserve.
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"Gold does not generate yield, so when US bond yields and the dollar move up, the opportunity cost of holding it rises. The correction is also being amplified by global long unwinding after a sharp run in bullion," Dasani said.
He added that while the long-term case for gold as a portfolio hedge remains intact, the trade had become crowded and was now witnessing profit booking.
Investors become more tactical
Nehal Meshram, Senior Analyst at Morningstar Investment Research India, said the trend suggests investors are becoming more tactical in their allocations.
"The reversal appears to have been driven by a combination of profit booking following the earlier rally in gold prices and a shift in investor risk appetite, with some rotation away from safe-haven assets," she said.
Feroze Azeez, Joint CEO of Anand Rathi Wealth, said the recent correction reflects changing return expectations after gold's sharp rise.
"After a strong run-up, future returns may not look as attractive as they did over the past year, prompting some investors to reallocate towards other asset classes," he said.
Silver ETFs continue to shine
While investors reduced exposure to gold, silver ETFs continued to witness strong demand. The category attracted net inflows of ₹2,133 crore in May, benefiting from expectations of robust industrial demand and growing investor interest.
However, Dasani cautioned that silver remains sensitive to changes in global macroeconomic conditions.
"Silver behaves like both a precious metal and an industrial commodity. When gold corrects on higher US rate expectations, silver usually reacts with higher beta," he said.
According to Dasani, silver's long-term outlook remains supported by themes such as solar energy, electrification and supply constraints, although near-term price movements will depend on the trajectory of the dollar, US bond yields and Federal Reserve policy expectations.
The latest AMFI data also comes as several fund houses, including HDFC Mutual Fund, Nippon India Mutual Fund and Tata Mutual Fund, have imposed restrictions on large investments into select gold ETF products.
Despite May's record outflow, gold ETFs have attracted robust inflows so far in 2026, suggesting that while investors are booking profits after a stellar rally, the long-term appeal of precious metals remains intact.
Published on: Jun 10, 2026 1:58 PM IST
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