Gold and its cheaper cousin, silver, have emerged as the best-performing assets this year, far outpacing returns from the stock and crypto markets. Gold's meteoric rise in 2025 has attracted investors to this market, and exchange-traded funds (ETFs) have seen inflows for the seventh consecutive month.

According to AMFI data, investor interest in gold ETFs remained strong in November, with net investments of ₹3,741 crore recorded. The best-performing gold ETFs this year have delivered returns of over 72%, further increasing their attractiveness to investors. But the question remains: is this rally in gold ETFs and gold prices overblown?

Why are prices rising?
In a Mint report, Akshat Garg, Head of Research and Product at Choice Wealth, said that there's no doubt that the rally has been very strong, and part of it is linked to the market environment. Investors, anticipating global interest rate cuts and seeking safe havens, invested in ETFs, leading to a sharp rise in gold prices from a normal base.

However, Garg also clarified that the demand environment and strong support remain, as central banks continue to buy gold and the US dollar remains weak. A weak dollar makes gold cheaper for those holding other currencies. Furthermore, central banks are expected to cut interest rates, making non-interest-bearing gold more attractive. Therefore, this isn't a bubble, but the rally has certainly added additional momentum to a strong base.

Can the rally in gold ETFs continue?
Mint quoted experts as saying that there's room for further upside, but the pace may be somewhat moderate. Some of the key reasons supporting gold buying and investing in gold ETFs are as follows.

Signs of interest rate cuts - Garg said that clear signs of interest rate cuts or lower real returns could make gold and silver more attractive. Last week, the US Federal Reserve cut rates by 25 basis points for the third time this year. Investors are expecting a more relaxed monetary policy in the US next year. In an interview with the Wall Street Journal on Friday, President Donald Trump called for aggressive rate cuts and said he expects the next Fed Chair to consult him on monetary policy. He named Kevin Hassett and Kevin Warsh as his picks to replace Jerome Powell.

Continuous ETF Investments - Analysts at Choice Broking say that continued inflows into gold ETFs could keep gold prices high, as each new purchase reduces supply and pushes prices higher. According to a World Gold Council report, investments in gold ETFs have increased to $378.7 million so far in 2025.

Weakness in the US Dollar - The dollar remained near a two-month low last week, making gold more attractive to foreign buyers. Experts believe that as long as the dollar remains weak, demand for gold will remain strong.

Gold-Silver Ratio - The gold-silver ratio is near its long-term average, which supports further gains. However, if it approaches the previous level of 6062, prices could see more volatility, as silver may outperform gold. Also Read - Earn regular income from toll plazas from home by investing just ₹100; just do this!

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