Gold and silver ETFs (exchange-traded funds that hold physical metal) are often sold as "safe havens". They can be a useful part of a portfolio, but that label hides five risks that matter to Indian investors. This guide walks through each one with data to September 2026.
Risk 1: Metals Can Swing as Much as Shares, or More
Volatility measures how much a price moves around from day to day. Higher volatility means bigger swings in both directions. Here is how gold, silver and the Nifty 50 compared, using fund NAVs published by AMFI.
| ETF | Period | Annual volatility | Largest fall in the period |
|---|---|---|---|
| Nippon India ETF Gold BeES | Nov 2016 – Sep 2026 | 14.8% | −22.3% (29 Jan → 23 Mar 2026) |
| Nippon India Silver ETF | Feb 2022 – Sep 2026 | 33.1% | −44.4% (29 Jan → 23 Mar 2026) |
| Nippon India ETF Nifty 50 BeES | Nov 2016 – Sep 2026 | 16.3% | −38.4% (14 Jan → 23 Mar 2020) |
Calculated from AMFI NAV history to 28 September 2026. Volatility is the annualised standard deviation of daily returns. Silver ETFs only launched in India in 2022, so the silver window is shorter.
Gold was about as volatile as the Nifty 50 over this period. Silver was roughly twice as volatile. In 2026 alone, silver's volatility was about 62% and gold's about 30%.
Big falls are not rare either. In US dollar terms, silver fell about 63% between April 2011 and June 2013, and roughly 33–40% in early 2020. Gold fell about 45% in dollars between 2011 and 2015. In rupee terms, Indian silver ETFs lost 44% in under two months in early 2026, and were still about 41% below their peak on 28 September 2026. For more on that fall, see why silver ETFs fell in 2026.
Risk 2: No Income, So Returns Depend Only on Price
A company earns profits, pays dividends and reinvests the rest, so a share's value can grow from inside the business. A gram of gold does none of this. It pays no interest or dividend. Ten grams stay ten grams; your return comes only from the price moving.
That does not mean gold has been a poor investment. Over long periods it has done well in rupees:
| Asset | Period | Annual return (CAGR) |
|---|---|---|
| Nifty 50 TRI (with dividends reinvested) | Nov 1995 – Aug 2026 | 12.38% |
| Gold, 24K per 10 g (₹4,680 → ₹1,33,195) | 1995 – 2025 | about 11.8% |
| Gold BeES (NAV) | Nov 2016 – Sep 2026 | 15.9% |
| Nifty 50 BeES (NAV) | Nov 2016 – Sep 2026 | 11.7% |
Nifty 50 TRI from the NSE Nifty 50 factsheet, 31 August 2026. Gold price CAGR calculated from Aditya Birla Capital's year-wise gold price table (updated 24 August 2026). ETF returns calculated from AMFI NAVs to 28 September 2026. CAGR means compound annual growth rate.
For example, 10 grams of gold cost about ₹8,400 in 2006 and about ₹1,43,020 in June 2026, roughly 17 times more. The risk is not low long-run returns. It is that a price-only asset can go nowhere for years. Gold in dollars peaked in 2011 and did not pass that high again until 2020. With no dividends coming in, nothing cushions you during a stretch like that.
Risk 3: The ETF Trails the Metal Every Year
Two terms get mixed up here:
- Tracking difference is how much the fund's return fell short of the metal's price over a period. This is the real cost to you.
- Tracking error measures how steadily the fund follows the metal. It is a measure of consistency, not a cost, so it should not be added to the expense ratio.
| Gold ETF | Expense ratio | Tracking error | 1-year tracking difference |
|---|---|---|---|
| Nippon India ETF Gold BeES | 0.81% | 0.41% | −2.07% |
| HDFC Gold ETF | 0.59% | 0.39% | −1.14% |
| ICICI Prudential Gold ETF | 0.49% | 0.47% | −1.65% |
| SBI Gold ETF | 0.65% | 0.43% | −1.94% |
| Kotak Gold ETF | 0.52% | 0.38% | −1.72% |
Expense ratios as shown on 28–29 September 2026. Tracking error and tracking difference computed by sharpely.in as of 27 September 2026; they are not the AMCs' own disclosures.
Across the 14 gold ETFs with over ₹1,000 crore in assets, the one-year gap to the gold price ranged from about −1.1% to −2.2%. Over three years to 31 August 2026, Gold BeES returned 36.07% a year against 37.77% for its benchmark, a gap of 1.7 points a year. The gap includes the expense ratio plus other costs such as custody and cash held for redemptions.
Small gaps add up. As an illustration, ₹10 lakh growing at 8% a year for 20 years becomes about ₹46.6 lakh. At 7% it becomes about ₹38.7 lakh. A one-point yearly shortfall costs about ₹8 lakh over that time. Compare funds on our gold ETF and silver ETF guides.
Risk 4: The Holding Period for Tax Is Easy to Get Wrong
Gold and silver ETFs are not taxed like equity, even though they trade on the stock exchange. For units sold on or after 1 April 2025 (rules carried into the Income-tax Act, 2025 from 1 April 2026):
| Product | Long-term if held | Long-term tax | Short-term tax |
|---|---|---|---|
| Gold or silver ETF (listed) | More than 12 months | 12.5%, no indexation | Your slab rate |
| Gold or silver fund of funds (FoF) | More than 24 months | 12.5%, no indexation | Your slab rate |
Source: TaxGuru, 18 July 2026; Zerodha Fund House, 11 December 2025. Surcharge and 4% cess apply on top. The ₹1.25 lakh yearly exemption applies only to equity, not to gold or silver.
The costly mistake is selling an ETF at 11 months instead of 13. For someone in the 30% slab, the gain at 11 months is taxed at 31.2% (30% plus 4% cess, before any surcharge). At 13 months it is taxed at 12.5% plus cess. The other mistake is assuming a gold FoF follows the ETF rule: an FoF needs more than 24 months.
Gold ETFs are also different from debt funds. Debt funds bought after 1 April 2023 are taxed at slab rate however long you hold them; gold and silver ETFs are not.
Risk 5: Two Metals Are Still One Asset Class
Holding both a gold ETF and a silver ETF is not the same as being diversified. Both are priced off international metal prices in dollars, converted to rupees. In 2026 both peaked on the same day, 29 January, and bottomed on the same day, 23 March. Gold fell 22% and silver 44%.
Currency matters too. Indian metal prices follow the world price times the dollar-rupee rate. If the rupee strengthens against the dollar, your rupee returns fall even if the world price is flat.
Real diversification comes from mixing different asset classes, such as equity, debt, metals and cash, not from several flavours of one.
Using Metal ETFs Sensibly
- Decide a fixed share of your portfolio for metals in advance, rather than buying after a rally. Keep it small enough that a 40% fall would not derail your plans.
- Think in years, not months. Metals can stall for long stretches.
- Use them to behave differently from equity, not to beat it.
- Rebalance when the share drifts well away from your target.
- Compare the tracking difference and expense ratio, not just past returns. Every gold ETF with over ₹1,000 crore in assets had tracking error of 1.15% or less (sharpely, 27 September 2026).
For a wider comparison of ways to own gold, see physical gold vs SGB vs gold ETF.
This guide explains how these ETFs work and compare. It is not a recommendation to buy any specific fund.