Investing in Gold: Top Gold Mutual Funds and ETFs in India for 2025

Gold has long been a beacon of stability and wealth preservation in India, a country where the yellow metal holds deep cultural and financial significance. With gold prices soaring and economic uncertainties lingering, investors are increasingly turning to gold-based investment vehicles like mutual funds and Exchange-Traded Funds (ETFs) to diversify their portfolios. In 2025, the allure of gold remains strong, driven by geopolitical tensions, inflation concerns, and its role as a safe-haven asset. This comprehensive guide explores the top-performing gold mutual funds and ETFs in India, highlighting their returns, benefits, and why they’re smart investment choices for both seasoned and novice investors.

Why Gold Remains a Smart Investment in 2025

Gold’s appeal in India transcends its aesthetic value. It’s a hedge against inflation, a buffer during economic downturns, and a reliable store of value. As of April 2025, gold prices in India have seen significant growth, with 24-carat gold trading at approximately ₹78,000 per 10 grams, reflecting a year-on-year increase of over 20%. This surge is fueled by global demand, supply constraints, and central banks stockpiling gold reserves.

Investing in physical gold, such as jewelry or coins, has its charm but comes with challenges like storage costs, purity concerns, and liquidity issues. This is where gold mutual funds and ETFs shine. These financial instruments allow investors to gain exposure to gold prices without the hassles of physical ownership. They are professionally managed, highly liquid, and often more cost-effective, making them ideal for modern investors.

Gold Mutual Funds: A Lucrative Option for SIP Investors

Systematic Investment Plans (SIPs) in gold mutual funds have gained traction among Indian investors seeking disciplined, long-term wealth creation. These funds invest in gold or gold-related instruments, tracking the price of the metal while offering the benefits of diversification and professional management. According to recent data, some gold mutual funds have delivered impressive returns of up to 47% through SIPs over the past year, making them a compelling choice for retail investors.

Top 4 Gold Mutual Funds with Stellar 1-Year SIP Returns

Based on recent performance metrics, here are four gold mutual funds that have outperformed the market with 1-year SIP returns of up to 47% as of March 2025. These funds are ideal for investors looking to capitalize on gold’s upward trajectory.

1. HDFC Gold Fund

The HDFC Gold Fund has emerged as a top performer, delivering a 1-year SIP return of approximately 47%. This fund invests primarily in gold ETFs and other gold-related instruments, ensuring high correlation with domestic gold prices. With a robust asset allocation strategy and low expense ratio, the HDFC Gold Fund is a favorite among conservative investors.

• Key Features:
  • Assets Under Management (AUM): ₹2,100 crore
  • Expense Ratio: 0.35%
  • Minimum SIP Investment: ₹100
  • Fund Manager: Experienced team with a track record of consistent performance
• Why Invest? The fund’s low-cost structure and strong performance make it suitable for investors seeking stability and growth. Its diversified portfolio minimizes risk while maximizing returns.

2. SBI Gold Fund

The SBI Gold Fund is another standout, offering a 1-year SIP return of around 46%. Managed by the State Bank of India’s mutual fund arm, this fund invests in gold ETFs and maintains a high degree of transparency in its operations. It’s particularly popular among investors who trust SBI’s brand legacy.

• Key Features:
  • AUM: ₹1,850 crore
  • Expense Ratio: 0.42%
  • Minimum SIP Investment: ₹500
  • Performance: Consistent returns aligned with gold price movements
• Why Invest? The fund’s accessibility and reliable performance make it a go-to option for retail investors. Its SIP-friendly structure encourages disciplined investing.

3. Axis Gold Fund

With a 1-year SIP return of 45.5%, the Axis Gold Fund has carved a niche for itself in the gold mutual fund space. The fund focuses on investing in gold ETFs and employs a dynamic strategy to optimize returns. Its relatively smaller AUM allows for agile management, catering to market fluctuations.

• Key Features:
  • AUM: ₹900 crore
  • Expense Ratio: 0.38%
  • Minimum SIP Investment: ₹100
  • Risk Profile: Moderate
• Why Invest? The Axis Gold Fund is ideal for investors seeking a balance between risk and reward. Its low entry point makes it accessible to young investors.

4. Nippon India Gold Savings Fund

The Nippon India Gold Savings Fund rounds out the list with a 1-year SIP return of 45%. This fund invests in gold ETFs and other gold-backed securities, offering a cost-effective way to gain exposure to gold. Its consistent performance and strong fund management make it a reliable choice.

• Key Features:
  • AUM: ₹1,600 crore
  • Expense Ratio: 0.40%
  • Minimum SIP Investment: ₹100
  • Performance: Strong correlation with gold price trends
• Why Invest? The fund’s affordability and steady returns make it a great option for long-term investors looking to hedge against inflation.

Benefits of Investing in Gold Mutual Funds via SIP

• Affordability: SIPs allow investors to start with as little as ₹100 per month, making gold investment accessible to all.
• Rupee Cost Averaging: SIPs mitigate the impact of market volatility by averaging the purchase cost over time.
• Disciplined Investing: Regular investments foster financial discipline, ideal for long-term wealth creation.
• No Storage Hassles: Unlike physical gold, mutual funds eliminate the need for secure storage or purity checks.
• Tax Efficiency: Gold mutual funds held for over three years qualify for long-term capital gains tax with indexation benefits.

Gold ETFs: High Returns for Lump-Sum Investors

For investors with a higher risk appetite and surplus capital, gold ETFs offer a direct and efficient way to invest in gold. These exchange-traded funds are listed on stock exchanges like the NSE and BSE, tracking the price of physical gold. Unlike mutual funds, ETFs require a demat account and are traded like stocks, offering high liquidity and transparency.

Recent data highlights the top-performing gold ETFs in India, with some delivering a compounded annual growth rate (CAGR) of up to 18% over the past three years. For a one-time investment of ₹1,50,000, these ETFs have generated substantial returns, making them a preferred choice for lump-sum investors.

Top 5 Gold ETFs with the Best 3-Year Returns

Here are the top five gold ETFs that have delivered the highest returns on a ₹1,50,000 one-time investment over three years, based on performance data as of March 2025.

1. HDFC Gold ETF

The HDFC Gold ETF leads the pack with a 3-year CAGR of 18%. A ₹1,50,000 investment made three years ago would have grown to approximately ₹2,28,000 by March 2025, yielding a profit of ₹78,000. This ETF tracks the domestic price of gold and is known for its low tracking error.

• Key Features:
  • AUM: ₹3,500 crore
  • Expense Ratio: 0.25%
  • Trading Unit: 1 unit = 1 gram of gold
  • Performance: High liquidity and minimal deviation from gold prices
• Why Invest? The HDFC Gold ETF is perfect for investors seeking high returns with low costs. Its strong market presence ensures ease of trading.

2. Invesco India Gold ETF

The Invesco India Gold ETF has delivered a 3-year CAGR of 17.5%, turning a ₹1,50,000 investment into ₹2,25,500, with a profit of ₹75,500. This ETF is backed by physical gold and offers a high degree of purity and transparency.

• Key Features:
  • AUM: ₹1,200 crore
  • Expense Ratio: 0.30%
  • Trading Unit: 1 unit = 1 gram of gold
  • Performance: Strong alignment with gold price movements
• Why Invest? The fund’s competitive expense ratio and reliable performance make it a solid choice for long-term investors.

3. LIC Gold ETF

The LIC Gold ETF has posted a 3-year CAGR of 17%, growing a ₹1,50,000 investment to ₹2,23,000, with a profit of ₹73,000. Managed by LIC Mutual Fund, this ETF is popular among conservative investors who value the LIC brand.

• Key Features:
  • AUM: ₹800 crore
  • Expense Ratio: 0.35%
  • Trading Unit: 1 unit = 1 gram of gold
  • Performance: Stable returns with low volatility
• Why Invest? The LIC Gold ETF is ideal for risk-averse investors seeking a trusted name and consistent returns.

4. SBI Gold ETF

The SBI Gold ETF has achieved a 3-year CAGR of 16.8%, transforming a ₹1,50,000 investment into ₹2,22,000, with a profit of ₹72,000. This ETF is highly liquid and widely traded, making it a favorite among active investors.

• Key Features:
  • AUM: ₹4,000 crore
  • Expense Ratio: 0.28%
  • Trading Unit: 1 unit = 1 gram of gold
  • Performance: High trading volumes and low tracking error
• Why Invest? The SBI Gold ETF’s liquidity and strong performance make it suitable for investors with a short- to medium-term horizon.

5. Nippon India ETF Gold BeES

The Nippon India ETF Gold BeES has delivered a 3-year CAGR of 16.5%, growing a ₹1,50,000 investment to ₹2,20,500, with a profit of ₹70,500. One of the oldest gold ETFs in India, Gold BeES is known for its reliability and market leadership.

• Key Features:
  • AUM: ₹5,500 crore
  • Expense Ratio: 0.29%
  • Trading Unit: 1 unit = 1 gram of gold
  • Performance: Industry benchmark for gold ETFs
• Why Invest? The fund’s large AUM and established track record make it a safe bet for long-term investors.

Benefits of Investing in Gold ETFs

• High Liquidity: ETFs can be bought and sold on stock exchanges during market hours, offering flexibility.
• Low Costs: ETFs typically have lower expense ratios than mutual funds, maximizing returns.
• Transparency: Prices are directly linked to gold, with minimal tracking error.
• No Storage Costs: ETFs eliminate the need for physical storage, reducing associated expenses.
• Tax Efficiency: Long-term capital gains tax applies after one year, compared to three years for mutual funds.

Gold Mutual Funds vs. Gold ETFs: Which Is Right for You?

Choosing between gold mutual funds and ETFs depends on your investment goals, risk appetite, and financial situation. Here’s a quick comparison to help you decide:

• Choose Gold Mutual Funds if you prefer SIPs, have a long-term horizon, or lack a demat account.
• Choose Gold ETFs if you have surplus capital, a demat account, and prefer trading flexibility.

Factors Driving Gold Prices in 2025

Several factors are propelling gold prices in India and globally, making gold-based investments attractive:

1. Geopolitical Uncertainty: Ongoing global tensions, including trade disputes and regional conflicts, are boosting demand for safe-haven assets like gold.
2. Inflation Pressures: Rising inflation in major economies is eroding purchasing power, driving investors to gold as a hedge.
3. Central Bank Buying: Central banks, including the Reserve Bank of India, are increasing gold reserves, tightening supply and pushing prices higher.
4. Weakening Rupee: A depreciating Indian rupee against the US dollar increases the cost of imported gold, contributing to price hikes.
5. Festive Demand: India’s wedding season and festivals like Diwali drive physical gold demand, indirectly supporting gold fund performance.

Risks to Consider Before Investing

While gold mutual funds and ETFs offer numerous benefits, they are not without risks:

• Market Volatility: Gold prices can be volatile in the short term, impacted by global economic trends and currency fluctuations.
• Tracking Error: Some funds may deviate slightly from gold price movements due to management fees or operational inefficiencies.
• Liquidity Risk: ETFs require a demat account and active trading, which may pose challenges for novice investors.
• Tax Implications: Short-term capital gains are taxed at slab rates, which can reduce returns for short-term investors.

To mitigate these risks, diversify your portfolio, invest for the long term, and consult a financial advisor to align your investments with your goals.

How to Start Investing in Gold Mutual Funds and ETFs

1. For Gold Mutual Funds:
   • Research funds based on performance, AUM, and expense ratio.
   • Open an account with a mutual fund platform or distributor.
   • Start an SIP or make a lump-sum investment.
   • Monitor performance periodically.
2. For Gold ETFs:
   • Open a demat and trading account with a broker.
   • Research ETFs based on AUM, expense ratio, and liquidity.
   • Buy ETF units through the stock exchange.
   • Track market trends and exit at the right time.

Conclusion: Invest Smartly in Gold for a Golden Future

Gold continues to be a cornerstone of wealth creation in India, and 2025 is no exception. With gold mutual funds delivering up to 47% SIP returns and gold ETFs generating 16.5%–18% CAGR over three years, these instruments offer a smart, hassle-free way to invest in gold. Whether you’re a disciplined SIP investor or a lump-sum trader, there’s a gold-based investment vehicle tailored to your needs.

The HDFC Gold Fund, SBI Gold Fund, Axis Gold Fund, and Nippon India Gold Savings Fund are top choices for SIP investors, while the HDFC Gold ETF, Invesco India Gold ETF, LIC Gold ETF, SBI Gold ETF, and Nippon India ETF Gold BeES lead the pack for ETF investors. By understanding your financial goals, risk tolerance, and market trends, you can make informed decisions to secure your financial future.