Indian Gold Exchange Traded Funds (ETFs) experienced their first and largest monthly outflow of 2026 in May, with investors withdrawing a record ₹725 crore. This reversal comes after a 12-month streak of inflows, as precious metal prices surged, prompting profit booking.
According to data released by the Association of Mutual Funds in India (AMFI), May's net outflows starkly contrast with April's net inflows of ₹3,040 crore. Despite the significant outflows, the Assets Under Management (AUM) for gold ETFs still saw a nearly 4% month-on-month increase, almost tripling year-on-year to ₹1.85 lakh crore by May-end, reflecting the strong appreciation in gold prices.
Why Gold Investors Are Booking Profits
Analysts attribute the shift to a combination of factors. Venkat Chalasani, Chief Executive of AMFI, noted that investors likely booked profits due to the recent rise in gold prices, partly influenced by import duties. Harshal Dasani, Business Head at INVasset PMS, highlighted that the market sentiment for gold has moved from an inflation hedge to a focus on rate-risk repricing.
Stronger-than-expected US non-farm payroll data has reignited concerns about persistent inflation, potentially reducing the likelihood of aggressive interest rate cuts by the US Federal Reserve. Dasani explained that gold, being a non-yield-generating asset, becomes less attractive when US bond yields and the dollar strengthen, increasing its opportunity cost. This correction is further amplified by a global unwinding of long positions after a rapid rally in bullion.
Nehal Meshram, Senior Analyst at Morningstar Investment Research India, suggested that investors are adopting a more tactical approach to their allocations. The reversal is driven by both profit-taking and a shift in investor risk appetite, with some moving away from traditional safe-haven assets.
Feroze Azeez, Joint CEO of Anand Rathi Wealth, echoed this, stating that after a strong upward trend, future returns from gold may not appear as compelling, encouraging reallocation to other asset classes.
Silver ETFs Shine Amidst Industrial Demand
In stark contrast to gold, Silver ETFs continued to attract robust demand in May 2026, garnering net inflows of ₹2,133 crore. This strong performance is underpinned by expectations of vigorous industrial demand and growing investor interest in the metal.
However, Dasani cautioned that silver remains highly sensitive to global macroeconomic conditions. He noted, "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."
The long-term outlook for silver remains positive, supported by emerging themes such as solar energy, electrification, and existing supply constraints. Nevertheless, near-term price movements will be influenced by the trajectory of the US dollar, bond yields, and Federal Reserve policy decisions.
The latest AMFI data also coincides with several fund houses, including HDFC Mutual Fund, Nippon India Mutual Fund, and Tata Mutual Fund, imposing restrictions on large investments into specific gold ETF products. Despite May's record outflow, overall inflows into gold ETFs for 2026 remain strong, indicating that while investors are realizing profits, the fundamental appeal of precious metals as a portfolio component endures.