Gold and silver ETFs surge: What investors must know

Akshaya Tritiya, traditionally seen as an auspicious day for buying gold, has evolved far beyond the jeweller's counter. Increasingly, Indian investors are turning to gold and silver exchange-traded funds (ETFs) as a modern, digital alternative.

The latest numbers underscore the shift: total turnover in gold and silver ETFs on Akshaya Tritiya (April 30, 2025) hit Rs 644 crore, almost three times last year's level of Rs 224 crore. Gold ETFs saw turnover rise to Rs 331 crore (from Rs 130 crore last year), while silver ETFs surged to Rs 313 crore (from Rs 95 crore), marking an even stronger jump (over three times).

These numbers tell a broader story about changing investor habits and the growing role of ETFs in Indian portfolios.

What's driving this ETF surge?

Several forces are at work behind the jump in volumes:

• Convenience: Investors can gain gold or silver exposure without worrying about purity or safe storage. ETFs trade through a demat account, just like stocks.
  
• Cost efficiency: Physical gold comes with making charges, storage costs, and purity risks. In contrast, ETFs carry lower transaction costs, and importantly, better liquidity reduces trading friction.
  
• Investor sentiment: Historically, Akshaya Tritiya has boosted physical gold sales. Now, we see similar momentum on exchanges, with industry-wide gold ETF turnover up 2.5 times year-on-year and silver ETF turnover up 3.3 times. Silver's faster rise suggests investors are looking beyond gold for diversification.

For context, back in FY25, the average daily combined industry volume (gold + silver ETFs) hovered around 60 per cent of total ETF turnover, reflecting the growing footprint of these products in the Indian market.

Liquidity: Why it matters for investors

The raw turnover numbers are not just a scoreboard. For ETF investors, they translate directly into practical benefits:

• Lower impact costs: On Akshaya Tritiya 2025, industry-wide data showed impact costs averaging 20 basis points (bps) for gold ETFs, but some leading ETFs delivered costs as low as 2 bps. For silver ETFs, the industry average stood at 32 bps, while the most liquid products offered costs closer to 3 bps.
  
• Reduced tracking error: High liquidity helps ETFs track underlying asset prices more tightly, giving investors more accurate exposure.

A look at past Akshaya Tritiya data shows that liquidity patterns are fairly consistent. For example, on May 10, 2024, gold ETFs saw turnover of Rs 130 crore, and by April 30, 2025, this had climbed to Rs 331 crore—yet the most liquid products maintained low impact costs even at higher trade volumes.

The key takeaway: before selecting an ETF, investors should examine not just the brand but liquidity, trading spreads, and tracking record.

Should you add gold or silver ETFs to your portfolio?

While gold and silver ETFs are increasingly popular, they serve a specific role:

• Diversifiers: Gold and silver historically show low correlation to equities, making them useful for reducing portfolio risk.
  
• Hedges: Precious metals tend to perform better during inflationary periods or when geopolitical risks rise.

However, they are not primary growth assets. Over long periods, equities have outperformed both gold and silver. For instance, over the past decade, gold has delivered an average annualised return of around 7-8 per cent, while Indian equity markets have returned closer to 12-14 per cent per year.

Silver adds a slightly different dynamic: it's partly an industrial metal, so prices are influenced by manufacturing demand as well as investor sentiment. This can make silver ETFs somewhat more volatile but also an interesting diversifier for those who understand the risks.

Final thoughts

This Akshaya Tritiya's ETF surge, with Rs 644 crore traded across gold and silver products, highlights how investor preferences are evolving. But whether you're drawn to the glitter of gold or the industrial edge of silver, the most important investing principles remain the same:

• Look beyond brand names to assess costs, liquidity, and tracking performance.
  
• Use gold and silver for portfolio stability, not aggressive growth.
  
• Make investment decisions grounded in your financial plan, not festival excitement or market momentum.

As always, disciplined, well-researched investing beats short-term enthusiasm—on Akshaya Tritiya or any other day.

An investor education and awareness initiative of Nippon India Mutual Fund.

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Also read: Buying gold this Akshaya Tritiya? Here's your guide

This article was originally published on May 02, 2025.