Gold ETFs Fall After 3-Month 27% Rally: What Investors Should Expect Next

Gold ETFs Surge 27% in Three Months, But Recent Volatility Raises Caution

Gold ETFs delivered exceptional returns of up to 27% in the past three months, drawing investor attention amid global economic uncertainties. However, the rally has recently faced a correction, reflecting profit-booking and heightened market volatility, prompting investors to reassess their strategy.

According to Satish Dondapati, Fund Manager – ETF, Kotak Mutual Fund, the rally, which began in April 2025, was driven by expectations of a potential U.S. Federal Reserve rate cut, geopolitical tensions, strong investment demand, and sustained central bank purchases. “The most recent $250–$300 upswing was largely fueled by safe-haven buying amid concerns over the ongoing U.S. government shutdown,” Dondapati noted.

Profit Booking and Market Correction Trigger Short-Term Volatility

Following an extended rally of nearly 25% within two months, gold prices faced a retracement as investors engaged in profit-taking. The correction was further intensified by rising U.S. bond yields and a firmer U.S. dollar, which weighed on gold sentiment.

Despite short-term fluctuations, Dondapati emphasizes that the medium-to-long-term structural drivers for gold remain intact, including elevated global debt, persistent central bank demand, and ongoing geopolitical and inflationary pressures.

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Gold ETF Performance Over Three Months

The performance of major Gold ETFs over the last three months has been robust:

• UTI Gold ETF: 27.19%

• LIC MF Gold ETF: 23.40%

• Kotak Gold ETF: 22.96%

• Nippon India ETF Gold BeES: 22.94%

• Tata Gold ETF: 22.25%

The average return across Gold ETFs during this period was approximately 23%, making them a preferred vehicle for investors seeking exposure to gold without holding physical assets.

Recent Market Trends: Gold Prices Slide

In recent trading sessions, gold futures declined, reflecting cautious sentiment. On October 24, 2025, gold futures for December delivery on the Multi Commodity Exchange (MCX) slipped ₹533 (0.43%) to ₹1,23,571 per 10 grams, while silver futures fell ₹1,386 (0.93%) to ₹1,47,126 per kilogram.

This short-term drop coincided with mixed global cues and investor caution ahead of key economic indicators. Traders opted to trim gains at elevated levels, leading to temporary retracements across ETFs.

Gold ETF Returns in the Past Two Weeks and One Week

Gold ETFs have experienced subdued performance in the short term:

• Past two weeks: Average return of 0.70%; UTI Gold ETF 4.26%; Aditya Birla Sun Life Gold ETF 0.12%

• Past one week: Average negative return of 6.11%; Tata Gold ETF declined 6.81%; UTI Gold ETF fell 2.64%

Dondapati explained that this volatility is temporary and largely reflects market profit-taking rather than a fundamental shift in gold’s long-term outlook.

Structural Drivers for Gold Remain Strong

Despite the recent slide, long-term drivers continue to support gold as a hedge:

• Elevated global debt levels increasing demand for safe-haven assets

• Ongoing central bank purchases maintaining market stability

• Geopolitical uncertainties and inflationary pressures

Billionaire investor Ray Dalio recently highlighted that U.S. sanctions on Russian oil giants could weaken the dollar and increase gold’s appeal. He emphasized that gold retains value as a non-fiat currency, historically appreciating during periods of currency stress and low interest rates.

Expert Advice: Phased Investment in Gold ETFs

Given current volatility, investors are advised to adopt a phased investment approach rather than making lump-sum allocations. Satish Dondapati suggests using Systematic Investment Plans (SIPs) or Systematic Transfer Plans (STPs) in gold ETFs or gold mutual funds, aligned with individual risk tolerance and asset allocation strategies.

This approach helps manage volatility while enabling investors to benefit from long-term structural growth in gold prices.

Understanding Gold ETFs

Gold ETFs are exchange-traded funds that track the price of physical gold, with each unit typically representing one gram of gold. They are listed on stock exchanges and require a demat and trading account to buy and sell.

Gold ETFs offer several advantages over physical gold:

• Ease of trading like stocks

• No storage or security concerns

• Lower management costs compared to physical gold holdings

By investing in Gold ETFs, investors can participate in gold price movements without holding physical bullion, while maintaining liquidity and cost efficiency.

Conclusion: Gold Remains a Strategic Hedge Amid Volatility

The recent 27% surge in gold ETFs followed by a correction underscores the volatile nature of short-term trading. However, the medium- to long-term outlook for gold remains positive, supported by macroeconomic and geopolitical factors.

Investors should focus on phased, disciplined investments in gold ETFs to capitalize on structural growth while mitigating short-term fluctuations. With continued safe-haven demand, central bank purchases, and macroeconomic uncertainties, gold is likely to retain its status as a core component of a diversified investment portfolio.

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