Gold ETFs See First Monthly Outflow In A Year After Price Rally

Indian gold exchange-traded funds (ETFs) registered their first net monthly outflow in a year during May, as investors booked profits following a surge in domestic gold prices.

Invest in Indian Markets and Unlock Future Potential With 5paisa!

Open Account Now

Data released by the World Gold Council showed that physically backed gold ETFs recorded net outflows of $61 million during the month. The withdrawals were equivalent to 0.4 tonnes of gold and reduced total ETF holdings to 116.3 tonnes.

The outflow ended a year-long run of net inflows into the category, reflecting a shift in investor behaviour after gold prices climbed sharply in the domestic market.

Higher Gold Prices Trigger Profit Booking

The reversal in fund flows came after India increased import duties on gold and silver on May 13. The duty hike raised the tax on imports of the precious metals to 15% from 6%. The measure was introduced as part of efforts to stem imports and ease pressure on the country’s foreign exchange reserves.

Domestic gold prices surged after the announcement. Gold hits ₹1,64,497 per 10 gm, the highest in over two months.

The sharp jump in prices led some investors to book profits made during the recent rally, leading to net sales from gold-backed investment products.

Strong Inflows Continue For The Year

And even with the May slump, investor interest in gold ETFs has remained strong in 2026. Indian gold ETF have attracted net inflows of $3.48 billion so far this year, according to World Gold Council data. Overall inflows suggest that the asset class is still finding favour with investors who want exposure to gold via financial instruments, rather than through physical buying.

ETFs have also become an increasingly important way for Indian investors to participate in the price movements of gold without actually holding the metal.

Effect on Gold Imports

The softening of ETF demand could have implications for India’s overall gold consumption trends. India is the second largest gold consumer in the world and changes in investment demand could affect import requirements. We could see decreased demand for imported gold from reduced inflows into gold ETFs, especially if investors keep taking profits at high price levels.

A fall in gold imports would also help in managing the country’s trade balance considering the large share of precious metal imports in India’s import bill.

May was the first monthly outflow in a year, but the broader trend in 2026 remains positive. While demand has eased recently, gold ETFs remain a key part of India’s investment landscape, with holdings still above 116 tonnes and year-to-date inflows still strong.