Gold has enjoyed a remarkable run over the past year, with gold prices in India rising by 43.18% as of 10 June 2026. Several factors, such as uncertain economic conditions, institutional accumulation, and increased investor interest have supported the recent drive in gold investment in the spotlight.
As gold prices climbed, many gold mutual funds delivered impressive returns, attracting the attention of investors looking to add a traditional safe-haven asset to their portfolios.
With several schemes available in the market, understanding which funds have performed well can help investors narrow their choices and evaluate available options more effectively.
What Are Gold Mutual Funds? How Do They Work?
Gold mutual funds are investment schemes that allow investors to gain exposure to changes in gold prices without owning the metal directly.
Instead of buying gold coins, bars, or jewellery, investors purchase units of a mutual fund whose value is linked to gold-related investments.
Additionally, since the underlying Gold ETFs typically hold physical gold or gold-linked instruments, the performance of a gold mutual fund broadly reflects changes in gold prices, subject to expenses and tracking differences.
How do they work?
- Investor Contributions: The investors purchase units of a gold mutual fund through lump-sum investments or SIPs.
- Fund Allocation: The fund house collects the money from investors and allocates it primarily to Gold ETFs.
- Underlying Gold Holdings: The Gold ETFs held by the scheme generally invest in physical gold or approved gold-related instruments.
- NAV Movement: The Net Asset Value (NAV) of the gold mutual fund rises or falls largely in line with movements in the value of its underlying Gold ETFs.
- Purchase and Redemption: Investors can buy or redeem fund units directly through the mutual fund platform without a demat or trading account.
- Indirect Gold Ownership: Investors do not own physical gold directly. Instead, they hold units of a mutual fund that derives its value from investments linked to gold.
Top 5 Gold Mutual Funds in India (2026 Updated List)
The following mutual funds are ranked based on their 1-year absolute returns, with data updated as of 10 June 2026, 08:00 AM IST, offering investors a snapshot of the top-performing gold mutual funds in India.
- Edelweiss Gold and Silver ETF FoF
| AUM | ₹2,945.86 crores |
| CAGR 3Y | 41.48% |
| 1Y Absolute Returns | 90.66% |
| Expense Ratio | 0.20% |
| Current NAV | ₹35.06 |
| Minimum SIP | ₹100.00 |
- Motilal Oswal Gold and Silver Passive FoF
| AUM | ₹2,652.42 crores |
| CAGR 3Y | 38.00% |
| 1Y Absolute Returns | 73.08% |
| Expense Ratio | 0.20% |
| Current NAV | ₹31.48 |
| Minimum SIP | ₹500.00 |
- DSP World Gold Mining Overseas Equity Omni FoF
| AUM | ₹1,709.68 crores |
| CAGR 3Y | 45.11% |
| 1Y Absolute Returns | 70.72% |
| Expense Ratio | 1.54% |
| Current NAV | ₹56.30 |
| Minimum SIP | NA |
- Aditya Birla SL Gold Fund
| AUM | ₹1,821.60 crores |
| CAGR 3Y | 35.00% |
| 1Y Absolute Returns | 56.53% |
| Expense Ratio | 0.18% |
| Current NAV | ₹45.70 |
| Minimum SIP | ₹1,000.00 |
- DSP Gold ETF FoF
| AUM | ₹494.44 crores |
| CAGR 2.56Y | 40.47% |
| 1Y Absolute Returns | 56.37% |
| Expense Ratio | 0.59% |
| Current NAV | ₹23.88 |
| Minimum SIP | ₹100.00 |
How to Choose the Best Gold Mutual Fund?
While choosing the best gold mutual fund, you should evaluate the following factors for informed decision-making:
- Expense Ratio: A lower expense ratio can help you retain a larger portion of your returns over time. In mutual fund investing, comparing costs across funds is therefore an important step.
- Tracking Error: Gold mutual funds invest through Gold ETFs, which makes tracking error a useful measure of how closely the fund reflects movements in gold prices.
- Assets Under Management (AUM): A higher AUM may indicate stronger investor participation and can provide insights into the fund’s scale and market acceptance.
- Historical Performance: You should review returns across different periods to understand how the fund has performed under varying market conditions.
- Investment Mode: You should choose a fund that supports your preferred investment method, whether through SIPs, lump-sum investments, or both.
- Portfolio Fit: Gold mutual funds should complement an investor’s overall asset allocation and align with their financial goals and risk appetite.
Gold Mutual Funds Investing: Benefits and Risks
Like any investment option, gold mutual funds present both opportunities and risks that deserve careful consideration. Let us discuss both!
Benefits of Investing in Gold Mutual Funds:
- Portfolio Diversification: Gold generally behaves differently from traditional asset classes such as equities and debt, which helps to diversify an investment portfolio.
- No Storage or Purity Concerns: Since investors do not own physical gold, they can avoid issues related to storage, security, and purity verification.
- Flexible Investment Options: Investors can invest through SIPs or one-time contributions based on their financial preferences.
Risks of Investing in Gold Mutual Funds:
- Price Volatility: The value of gold mutual funds is influenced by fluctuations in gold prices, which can lead to periods of negative returns.
- Limited Income Generation: Unlike some other investments, gold does not generate regular income in the form of dividends or interest.
- Concentration Risk: Since these funds are linked to a single asset class, it may reduce portfolio diversification and expose investors to gold-specific market risks.
Common Mistakes Investors Should Avoid
Even though gold mutual funds offer a simple way to invest in gold, certain mistakes can affect portfolio outcomes. Keeping these points in mind can help investors align their decisions with long-term objectives.
| Investing based on recent returns | Investment decisions should consider multiple factors rather than recent returns alone. |
| Over allocating to gold | Excessive exposure to gold can reduce portfolio diversification. |
| Ignoring financial goals | Gold investments should align with an investor’s objectives and risk profile. |
| Expecting consistently high returns | Gold prices can remain flat or decline during certain market phases. |
| Overlooking tracking error | A higher tracking error may cause the fund’s returns to differ from gold price movements. |
| Relying solely on gold | Gold is generally more effective as a diversification tool than a standalone investment strategy. |
Conclusion
Gold mutual funds offer a convenient way to participate in gold price movements without the challenges of owning physical gold. They can support portfolio diversification while providing easy access through SIPs and lump-sum investments.
However, investors should evaluate factors such as tracking error, expense ratio, and portfolio suitability before investing. When used as part of a balanced investment strategy, gold mutual funds can serve as a useful complement to other asset classes.
FAQs
Gold mutual funds eliminate concerns related to storage, security, and purity that come with physical gold. They also offer greater investment flexibility through SIPs and easier redemption, making them a convenient option for many investors.
Yes, most gold mutual funds allow investments through Systematic Investment Plans (SIPs). This enables investors to invest a fixed amount regularly and build exposure to gold over time without requiring a large initial investment.
The minimum investment amount varies across fund houses. Many gold mutual funds allow SIP investments starting from ₹100 to ₹1,000, while lump-sum investment requirements may differ depending on the scheme.
No, gold mutual funds do not offer guaranteed returns. Their performance depends primarily on movements in gold prices, which can fluctuate based on economic conditions, investor demand, and global market trends.
Gold is usually considered a defensive asset and may perform differently from equities during periods of market stress. However, gold mutual funds are subject to price fluctuations and cannot completely eliminate investment risk.
In India, the taxation of gold mutual funds and Gold FoFs depends on your holding period. If you hold the fund for more than 24 months, it attracts a Long-Term Capital Gains (LTCG) tax of 12.5% without indexation. If sold within 24 months, Short-Term Capital Gains (STCG) are taxed according to your income tax slab rate.
