Gold Price to Hit ₹1.25 Lakh in 2026? Best Gold ETFs vs FoF for Indian Investors

Today, more investors are shifting from physical gold to market-linked options, such as Gold Exchange Traded Funds and Gold Fund of Funds. Both offer transparency and easy access through a demat or mutual fund account. This blog explains the outlook for gold in India and compares Gold ETFs and FoFs so you can choose wisely.

Will Gold Really Hit ₹1.25 Lakh per 10 Grams by 2026?

Why is this target being discussed

Gold prices in India have moved up steadily in recent years. This rise is linked to three key trends:

• Global uncertainty and inflation support safe-haven assets.

• Central banks continue to add gold to their reserves.

• Interest rate cuts can make gold more attractive.

So the ₹1.25 lakh price level by 2026 is being considered possible, not speculative.

The India-specific factor

Domestic prices do not depend solely on global gold rates. The rupee also influences them. If the rupee weakens against the US dollar, gold becomes costlier in India, even when global prices remain flat. The result acts as a natural hedge for long-term investors.

A balanced view

Gold still behaves like any other market asset. Short-term swings can occur due to:

• Economic policy changes

• Global events

• Investor profit booking

That is why gold works best as part of a diversified portfolio, not as a quick-return bet.

Gold ETFs vs. Gold Fund of Funds: What's the Difference?

A growing number of Indian investors prefer market-linked gold investments instead of buying jewellery or coins. Two common choices are Gold Exchange Traded Funds (ETFs) and Gold Fund of Funds (FoFs). Both track gold prices, but they are not the same product. Understanding the difference helps you pick the right route.

Key Differences at a Glance

Top 5 Gold ETFs by AUM & Performance (Jan 2026)

Data as of Jan 2026. Source: NSE/AMFI. 

When a Gold ETF may suit you

• You already have a demat and trading account

• You want real-time buying and selling during market hours

• You prefer lower ongoing costs

When a Gold FoF may suit you

• You do not want a demat account

• You are comfortable with SIP investing

• You prefer the simplicity of mutual funds

Risk, taxation, and tracking

Both options are subject to market risk because they follow gold prices. Tax treatment is the same as that of other non-equity mutual funds. Long-term capital gains apply after three years, with indexation benefits as per current tax rules. Tracking error can occur in both, but ETFs generally keep it lower due to direct gold backing.

Best Gold FoFs for SIP Investors (Min. ₹500/month)

- Invesco Gold ETF FoF: 32% 3-year returns, ₹1,000 lump sum

- Kotak Gold Fund: 33% 3-yr CAGR, SIP-friendly

- Motilal Gold-Silver FoF: 98% 1-yr returns, multi-asset

Perfect for demat-free gold exposure. Compare tracking error vs physical gold.

How Much of Your Portfolio Should Be in Gold?

Gold is used as a stabiliser in a portfolio. It can help during periods of market stress, but it should not become the main investment. For most Indian investors, a 5% to 15% allocation is generally considered reasonable, based on risk tolerance and investment goals.

How to think about your allocation

Keep the range simple:

• Lower allocation (5%–8%) if you are comfortable with equity market risk

• Middle range (8%–12%) if you want a balance between growth and stability

• Higher range (12%–15%) if capital protection matters more than high returns

Investing style

If you prefer gradual investing, an SIP in a Gold FoF may suit you. If you already have a demat account and invest occasionally in larger amounts, a gold ETF can be suitable.

Which Option Suits Different Types of Investors in India?

Different investors use gold for different reasons. Matching your purpose with the right product helps you invest with clarity.

1. If you are a first-time market investor

You may prefer a Gold Fund of Funds. It works through a mutual fund platform and does not require a demat account. SIPs help you start with small amounts while you get comfortable with market-linked products.

2. If you already invest in stocks or ETFs

A gold ETF can be suitable. You can buy and sell through your demat account during market hours. This route often has lower ongoing costs and better price tracking.

3. If you value convenience above all,

FoFs offer a simple process with consolidated statements, automatic SIPs, and straightforward redemption. This suits investors who want gold exposure without monitoring the market closely.

4. If you prefer control and transparency

ETFs provide live prices and direct execution on the exchange. This suits investors who want greater visibility and already use a broker trading platform.

A Simple Decision Path: Gold ETF or Gold FoF?

Use this step-by-step path to reach a clear choice.

Step 1: Do you already have a demat account?

• Yes: You can consider gold ETFs. They fit naturally into your existing investing setup and usually come with lower ongoing costs.

• No: You can begin with a Gold FoF through a mutual fund platform. If you plan to explore ETFs, stocks, or index funds later, opening a demat account now can still be useful.

Step 2: How do you prefer to invest?

• Occasional lump sum investments: Gold ETFs may suit you since they trade live on the exchange.

• Regular small SIP amounts: Gold FoFs allow simple monthly investing without tracking market prices.

Step 3: How involved do you want to be?

• Hands-on: ETFs provide price visibility throughout the day and direct control through your broker platform.

• Low effort: FoFs keep things simple with automatic SIPs and consolidated mutual fund statements.

Step 4: What costs matter to you?

• If you want to minimise expense ratios over time, ETFs usually have a cost advantage.

• If you value convenience even at a slightly higher cost, FoFs may still be comfortable.

Begin Your Gold ETF Investments With the Right Broker

Gold may reach ₹1.25 lakh per 10 grams by 2026 if global uncertainty, rupee movement, and demand trends continue to support prices. For Indian investors, the key decision is not only whether to invest in gold but also which route to use. Gold ETFs suit investors who prefer market execution through a demat account, while Gold FoFs provide a simpler mutual fund route.

The smartest step is to align your choice with your risk profile and investing style. If you plan to invest through ETFs, start by comparing the best demat and trading account providers. A reliable, low-cost broker can make your gold investing journey smooth, transparent, and well structured for the long term.