Gold FoFs halt fresh investments, but silver mutual funds remain open: Experts decode the reasons and explain what to do

Investors can gain exposure to gold and silver through exchange-traded funds (ETFs), fund of funds (FoFs), and FOFs combining both metals. While ETFs trade on stock exchanges like shares and are backed by physical metal, FoFs invest in underlying ETFs and are priced at the end of the day.

Following notices issued on 15 October 2026, several mutual fund houses have restricted fresh investments in gold FoFs and gold-silver FoFs, while gold ETFs, silver ETFs and FoFs remain open. Existing registered SIPs and STPs generally continue, while redemptions remain available.

The experts suggest that the move aims to curb gold imports and explain what investors should do.

Harsh Vardhan Dawar, ACA, CFA, FRM, Founder of Wealth Cafe, said the restrictions align with the government's efforts to discourage gold investment and to offset some of the excess demand for physical gold as a result of the current festive season of Dussehra and Diwali, which also marks the wedding season of the year.

Eshaan Lazarus, Founder and CEO of 021 Trade, said gold has a greater impact on India's import bill. In FY2025-26, gold imports stood at about $72 billion against $12 billion for silver. During April-September 2026, gold imports were $19.27 billion and silver imports $2.40 billion, both lower year-on-year, partly following the May increase in import duty from 6% to 15%.

Harsh Soni, Founder of NYVO Money, pointed to additional pressures, including rupee depreciation and Brent crude prices remaining above $105 a barrel. While oil imports are essential, gold imports can be curbed to ease pressure on the country's external balances.

“Restricting silver imports would hit manufacturing demand, not just investment demand. Silver has no cultural buying surge comparable to gold's Dhanteras peak,” Soni added.

“If silver inflows swell sharply, the same logic could be applied. For now, the difference comes down to size, import impact and the festive timing that put gold in focus first,” Harsha Vardhana VM, Founder-Group CEO, Atom Financial Services, added.

Sachin Kabra, Co-founder, Foliyo.ai, noted that silver FoFs also faced subscription restrictions in October 2025 when domestic prices traded at significant premiums amid supply constraints.

Dawar said the gold-silver ratio tells you how many ounces of silver are needed to buy one ounce of gold. If the ratio is above 80, silver is considered cheaper and if it is below 50, silver is considered expensive. Given the current gold-silver ratio is at 73, silver looks slightly cheaper relative to gold.

Soni said silver had fallen about 53% from its January peak, compared with a roughly 26% drawdown in gold. An investor rotating into silver because a gold door closed is swapping a 26%-drawdown asset for a 53%-drawdown asset, because a door closed, not because the case for silver improved.

Kabra said one risk investors should particularly watch is the difference between a gold ETF's traded price and its underlying indicative NAV. An ETF may be available to buy, but that doesn't automatically mean it is available at a fair price.

Silver ETFs can also trade above their indicative net asset value (iNAV). They traded at premiums of 5-10% for five consecutive sessions in October 2025 amid supply constraints, Soni added.

Vardhana VM said that since gold ETFs remain open, there is no need to switch. Anyone with a demat account can keep building a gold holding, and a small silver position of perhaps 3% to 5% of a portfolio can be added separately if the investor wants a growth tilt.

Soni said SEBI requires gold ETFs to invest at least 95% of their corpus in gold and gold-related instruments, typically 995-purity bars held in custodians' vaults.

Dawar explained that when an investor buys an ETF unit on an exchange, it usually means purchasing it from another investor, without creating additional units.

However, when AMCs deploy FoF subscription money into underlying ETFs, this can potentially add to physical gold demand as ETFs may create additional units. Restricting FoFs therefore offers a more direct way to moderate import demand.

Kabra said there is also a practical difference. AMCs can stop accepting fresh FoF subscriptions while continuing redemptions. Stopping ETF trading is more complicated because existing investors must retain the ability to sell their holdings.

Vardhana VM said a FoF is accessible to people with no demat account. Therefore, it draws a broad base of small, recurring investors, especially around festivals. Pausing it controls the largest and easiest pipeline without shutting down exchange trading.

Soni added that Gold FoFs are about 34% of the industry's gold assets, with the remaining 66% in ETFs. FoFs account for a quarter to a third of flows. ETF holdings are small relative to India's annual gold consumption.

Lazarus said some mixed gold-silver FoFs, including HDFC’s, are also affected because part of their money goes into gold.

Dawar said an ETF is the preferred route of investment as it is cheaper than a FoF for an investor, whether buying gold or silver.

Vardhana VM said gold allocation matters more than the investment route, suggesting around 10-15% in gold for most portfolios. Silver ETFs could be an optional 3-5% allocation for investors comfortable with higher volatility.

Soni said silver should remain a small satellite holding for investors who already have gold exposure and can tolerate drawdowns exceeding 50%. Silver is not a substitute for gold's hedging role, and investors should not switch merely because gold FoFs have closed to fresh subscriptions. For many investors, waiting may be the more prudent choice.

Sheetal Goel is a Content Producer at Livemint, where she covers corporate developments, personal finance, business trends, markets, and SEBI-related updates. She focuses on simplifying complex financial concepts and presenting them in a clear, reader-friendly manner, thereby helping audiences better understand investment trends, personal finance, and market developments. Her writing focuses on making finance more accessible to everyday readers while maintaining clarity, accuracy, and relevance. <br><br> She holds a degree in Economics (Hons.) along with an MBA in Finance, which has helped her develop a strong foundation in financial analysis, market understanding, and business reporting. Before joining journalism, she worked with finance and broking firms, where she closely followed market developments, investment strategies, and evolving industry trends. This practical exposure strengthened her understanding of financial markets. She has also written content across multiple formats and platforms, including YouTube, LinkedIn, and Instagram. <br><br> Over time, she has developed expertise in covering market-linked stories, investor-focused topics, and regulatory updates in a simplified yet informative style. She also enjoys reading and listening to Hindi poetry, reflecting her appreciation for literature and creative expression beyond the world of markets and numbers.

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