8 Best Gold Mutual Funds 2025

Gold has emerged as an important Asset Class in most portfolios, given its ability to grow with Inflation and protect the Portfolio from Volatility caused by financial and economic crises. As gold continues to be a key part of a well-rounded investment strategy, Gold Mutual Funds have gained significant popularity in recent years.

Today, gold as an investment is available in many forms, such as physical gold, E-Gold, etc. However, Gold Funds have emerged as one of the most accessible and popular routes for gold investments. Let’s take a close look at some of the best Gold Mutual Funds to invest in 2025.

Why Gold Funds Are Gaining Popularity?

Indians have always been culturally inclined towards buying gold, whether for ornamental purposes or wealth creation. Festivals, weddings, and celebrations throughout the year further reinforce this tradition. While earlier, physical gold used to be the preferred choice, Gold Mutual Funds have become increasingly popular due to their numerous benefits over physical gold, including:

• Minimum investment amount (starting as low as INR 100 through SIP),
• Diversification of assets,
• No Demat account requirement,
• SIP growth potential for systematic wealth creation,
• liquidity, as units can be bought or sold from the fund house.

Gold Mutual Funds are a variant of Gold ETFs (Exchange-Traded Funds). While gold ETFs directly invest in gold bullion or securities linked to gold prices, Gold Mutual Funds invest in gold ETFs on behalf of investors. Unlike physical gold, there are no storage hassles, and gold prices are tracked in real-time, Offering investors transparency and security.

Minimum investment for Gold Mutual Funds typically starts at INR 100, making it easy for investors to enter the Market with small amounts, and systematic Investment plan (SIPs) allow for flexible, long-term growth.

Taxation on Gold Mutual Funds

Gold Mutual Funds are taxed based on Capital gains and the holding period. If you hold the fund for less than 24 months, your gains are taxed as short-term Capital Gains (STCG) at 20% as per your applicable income tax slab rate. However, if the holding period exceeds 24 months, the capital gains are considered long-term capital gains (LTCG) and taxed at a uniform rate of 12.5%, with no indexation benefits.

Top Performing Gold Funds to Invest in India (2025)

Top 4 Benefits of Gold Investments

1. Hedge Against Inflation

Gold is often seen as a hedge against inflation. When inflation rises, the value of gold tends to rise as well, offering stability in uncertain times. Unlike cash, which may lose its purchasing power, gold’s value increases over time, making it a safe asset during inflationary periods.

2. Liquidity

Gold is highly liquid, meaning it can be easily sold in times of need. Compared to physical gold, Gold ETFs and Gold Mutual Funds offer higher liquidity since they can be sold through the mutual fund house or stock exchange.

3. Diversification

Gold is often referred to as a “safe-haven” asset. Its price movements usually have low correlation with stock markets, making it a valuable tool for diversification. When stock markets are volatile or declining, gold often performs better, helping to protect your portfolio from significant losses.

4. Valuable Asset

Gold has maintained its value for centuries. While it may not always offer explosive returns, it is a stable asset that provides moderate returns over time. In certain short periods, such as during economic crises, it has even shown significant returns.

Who Can Invest Gold Mutual Funds?

Gold Mutual Funds are ideal for:

• Investors who do not have a Demat account or are not interested in buying physical gold.
• People looking for small initial investments and systematic wealth creation.
• Individuals who want to benefit from gold's stability without the risks and hassles of storing physical gold.

Gold Mutual Funds are suitable for anyone seeking diversification and capital appreciation while enjoying the flexibility of no physical storage requirements and a low entry barrier.

How Invest in Gold Funds Online?

1. Open Free Investment Account for Lifetime at Fincash.com.

2. Complete your Registration and KYC Process

3. Upload Documents (PAN, Aadhaar, etc.). And, You are Ready to Invest!

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Is It the Right Time to Invest in Gold Mutual Funds with Gold Prices Rising?

The short answer is Yes, but with a few nuances to consider.

1. Gold Prices and Timing the Market

Gold prices fluctuate due to a variety of economic factors, including inflation, interest rates, and market instability. When gold prices are rising, it's often a response to economic or geopolitical uncertainty (e.g., inflationary pressures, stock market volatility, or currency Depreciation).

Historically, gold has performed well when other asset classes (like stocks or Bonds) Underperform. However, predicting exact price movements is difficult, and timing the market isn't always a reliable strategy.

2. Dollar-Cost Averaging (DCA) Strategy

One of the most reliable strategies, particularly for gold mutual funds, is Systematic Investment Plans (SIP). With SIPs, you invest a fixed amount regularly, regardless of gold’s price. This approach helps mitigate the risk of trying to buy at the "peak" or "bottom" of a price cycle.

SIP advantage: By Investing consistently, you average out your cost of investment, potentially avoiding the risks of buying at a high price.

3. Gold as a Long-Term Investment

Gold’s role in a portfolio is typically as a long-term hedge against inflation and economic instability. Although the price of gold may rise or fall in the short term, its value has historically held up well over long periods.

Even with rising gold prices, the fundamentals of gold as a store of value remain unchanged. If you invest in gold mutual funds for the long term, you’re likely to see positive returns, as gold often outperforms during inflationary periods or financial crises.

4. Economic Environment

If inflation is rising or if the global Economy is facing turbulence (e.g., financial market instability or currency depreciation), gold becomes an attractive investment. As gold is negatively correlated with other asset classes (like equities), it can serve as a safe-haven investment.

Interest rates also play a key role—when rates are low, gold often performs better, since it becomes more appealing compared to other assets like bonds or savings accounts that offer low returns.

5. Considerations for Rising Gold Prices

If gold prices are increasing now, it could indicate a strong demand for gold, driven by inflation or uncertainty in the markets. If you're planning to invest in gold mutual funds, remember that rising prices could mean higher entry points, but the long-term benefits could still outweigh the short-term fluctuations.

Gold’s cyclical nature: After periods of significant price increases, gold often experiences corrections. However, over the long term, its average returns tend to outpace inflation and provide stability to a diversified portfolio.

Conclusion:

It remains a good time to invest in gold mutual funds, particularly if you’re looking at long-term gains. Consider using SIPs to average out the cost of buying, and remember that gold’s role as a hedge against inflation and volatility is unlikely to change.

FAQs

1. What should I look for while investing in gold mutual funds?

A: A: When choosing a gold mutual fund, compare its growth rate, Net Asset Value (NAV), and historical returns. It’s also essential to consider fund size, expense ratios, and fund manager performance.

2. Why should I invest in a gold fund?

A: A gold mutual fund offers a hedge against market volatility and inflation. It’s also a liquid investment and provides diversification in your portfolio.

3. Why should I invest in SBI Gold?

A: SBI Gold Fund is one of the leading funds with a proven track record of growth, showing steady returns over time. It is backed by SBI Mutual Fund, one of India’s most trusted names in the Financial Sector.

4. Why should I invest in Axis Gold Fund?

A: Axis Gold Fund has demonstrated strong returns since its inception and is known for consistent growth. Its reliable performance makes it a solid choice for conservative gold investors.

5. Why should I invest in Kotak Gold Fund?

A: Kotak Gold Fund has been one of the best performers in the gold mutual fund space, offering competitive annual returns and a well-managed portfolio.

6. Is investing in gold funds safe?

A: Yes, gold mutual funds are generally safe. However, like all investments, they are subject to market fluctuations. Over the long term, however, gold has proven to be a stable asset class.

By Rohini Hiremath

Rohini Hiremath works as a Content Head at Fincash.com. Her passion is to deliver financial knowledge to the masses in simple language. She has a strong background in start-ups and diverse content. Rohini is also an SEO expert, coach and motivating team head!

You can connect with her at rohini.hiremath@fincash.com