Best Gold Mutual Funds to invest in 2025

Gold has long been considered a safe option for investment, valued for its ability to retain its worth over time. It has also proven to be a reliable asset for protecting investments during periods of market volatility, when it moves in the opposite direction of equities. Investing in gold can take various forms, from physical assets like Coins, Bars and jewellery to Digital Gold, Gold Mutual Funds, ETFs and Government Bonds. These diverse investment options allow you to invest in gold without the need to own the metal physically. However, when considering investments in Mutual Funds, regardless of the avenue you choose, caution is paramount.

In this blog, we've compiled a list of the Best Gold Mutual Funds in India for the year 2025. Investing in these top Gold Mutual Funds can be advantageous for investors who wish to gain exposure to gold without the need to possess the physical metal. Let's explore the world of Gold Mutual Funds and explore the options available.

What is a gold Mutual fund?

Gold Mutual Funds are a category of investment funds that hold assets related to gold. These funds can comprise of various instruments directly linked to gold prices, such as physical gold, gold mining company stocks and more. By investing in Gold Mutual Funds, you gain exposure to the price movements of gold, without the need to own the physical metal. It offers a convenient and paperless way to invest in gold

What is the Purpose of Gold Funds?

The purpose of a gold mutual fund is to help investors invest their money in gold without buying physical gold, like jewellery. These mutual funds invest in gold-related assets or gold ETFs, so your money grows with the value of gold.

These funds provide a safe and secure way to benefit from gold prices without worrying about storage or purity. A major benefit of these funds is that they are also helpful during inflation or uncertain times, since gold mostly holds its value. This is why these funds are an ideal way to add stability and balance to your overall investment portfolio.

How do Gold Mutual Funds work?

The working of gold mutual funds is quite simple. The money collected from investors is invested in gold ETFs, which are traded on the stock exchange. These ETFs represent gold in units, so when you invest in a gold fund, you are indirectly buying gold. The value of your investment changes with the price of gold. As gold prices move up or down due to global rates, import duties, or currency changes, the fund’s value (NAV) also changes. You earn returns based on these price movements. When you redeem your units, your gain or loss depends on the gold price at that time.

Top 5 Gold Mutual Funds in India for 2025

Here are the top-performing Gold Mutual Funds in India for the year 2025:

1. ICICI Prudential Regular Gold Savings (FOF) Direct-Growth:

Fund Category: Other Mutual Fund Scheme

Objective: Generate returns by investing in units of ICICI Prudential Gold ETF.

2. Axis Gold Direct Plan-Growth:

Fund Category: Other Mutual Fund Scheme

Objective: Generate returns that closely correspond to those generated by Axis Gold ETF.

3. Kotak Gold Fund Direct-Growth:

Fund Category: Other Mutual Fund Scheme

Objective: Generate returns by investing in units of Kotak Gold Exchange Traded Fund.

4. SBI Gold Direct Plan-Growth:

Fund Category: Open-ended scheme

Objective: Provide returns closely aligned with those provided by SBI Gold ETF, while also allocating a portion to short-term debt securities.

Why Invest in Gold Mutual Funds?

Before you venture into Mutual Fund investments in gold, there are several crucial factors to keep in mind:

1. Fluctuations in Gold Prices:

Gold prices are subject to fluctuations influenced by global demand and supply. Market risk and price volatility, similar to other investment options, affect gold funds. While short-term market conditions may introduce volatility, gold investments tend to balance out over the long term.

2. No Physical Gold Ownership:

Gold funds offer a way to remain invested in gold without owning physical gold. If you prefer not to possess physical gold but still want exposure to the commodity, Gold Mutual Funds, Digital Gold, Gold ETFs and Gold Bonds can be beneficial.

3. Taxation on Gold ETFs:

Taxation on long-term capital gains from gold ETFs is applicable at a rate of 20% plus cess with indexation benefits. Short-term gains are taxed based on the investor's income tax slab. Investments held for more than three years qualify as long-term.

4. Taxation on Gold FoF:

Fund-of-Fund (FoF) investments, including gold FoF, are treated as non-equity funds for taxation purposes. Short-term Capital Gains (STCG), withdrawals within three years, are added to the taxable income and taxed according to the investor's income tax slab. Long-term Capital Gains (LTCG) withdrawal after three years with indexation benefits are taxed at a rate of 20%.

Smart Ways to Track Your Gold Mutual Fund Growth

Once you've invested in Gold Mutual Funds, it's crucial to keep a vigilant eye on your portfolio. Here are some tips for monitoring your Gold Mutual Fund investments effectively:

1. Regular Portfolio Review: Periodically review your Gold Mutual Fund holdings to assess their performance. While gold is generally considered a stable asset, economic conditions can impact its value. Keep an eye on market trends and global events that may influence gold prices.

2. Diversification: Consider diversifying your investment portfolio by allocating a portion to Gold Mutual Funds. Diversification helps spread risk and reduces the impact of volatility in any single asset class.

3. Set Clear Investment Goals: Define your investment objectives and time horizon. Are you investing in gold to hedge against inflation, as a long-term investment or as a short-term asset? Understanding your goals will help you make informed decisions.

4. Stay informed: Stay informed about changes in taxation policies and regulations that may affect your Gold Mutual Fund investments. Be aware of the tax implications of your investment choices.

5. Consult Financial Experts: Consider seeking advice from financial experts or advisors who can provide insights into market conditions and help you make well-informed investment decisions.

6. Rebalancing: Periodically assess your overall investment portfolio and rebalance if necessary. Rebalancing ensures that your asset allocation aligns with your risk tolerance and investment goals.

7. Long-term Perspective: Keep in mind that Gold Mutual Funds, like gold itself, are often viewed as long-term investments. Short-term fluctuations are common, but a patient, long-term perspective can help you ride out market volatility.

How to Invest in Gold Funds?

Investing in gold today is much easier than in old times. While people still buy jewellery, coins, or bars, there are easier ways to invest without worrying about storage or safety. A very popular method is Gold ETFs or Exchange-Traded Funds, which work like digital gold and reflect real gold prices. You need to have a Demat Account for these funds.

Another simple option is Gold Mutual Funds, where you don’t need a Demat Account. You can start investing directly through ICICI Bank by completing KYC. You can choose a lump sum or set up an SIP to invest small amounts regularly. Gold funds are flexible, liquid, and ideal for those who want to benefit from gold’s value while keeping their investments safe and easy to track.

Comparison Between Different Gold Investment Methodologies

Gold investments in India can be done in many ways, each suited to different needs. Let’s look at the major options:

1. Physical Gold

It means buying jewellery, coins, or bars as a traditional method. While it provides a sense of ownership, it has drawbacks such as making charges, risk of theft, and storage costs. It’s also less liquid when you need urgent cash.

2. Gold ETFs

Gold Exchange-Traded Funds allow you to buy gold in digital form, backed by physical gold stored with banks. They are safe, transparent, and traded on stock exchanges. The only requirement is a Demat Account.

3. Gold Mutual Funds

Gold mutual funds invest in gold ETFs on your behalf. They don’t require a Demat Account, making them more beginner-friendly. You can start investing online through ICICI Bank by completing KYC. These funds are highly liquid and let you invest small amounts through SIPs.

Here is a table, helping you understand it better:

Conclusion

Gold Mutual Funds offer investors a convenient and efficient way to gain exposure to the precious metal, without the need for physical ownership. The Best Gold Mutual Funds in Mutual Fund investments in 2025 for capital appreciation and portfolio diversification. Investing in gold can be a strategic move to safeguard your investments during uncertain economic times.

As you consider investing in Gold Mutual Funds, it's essential to keep in mind the fluctuating nature of gold prices, the benefits of paperless ownership and the taxation implications. Whether you choose ICICI Prudential Gold, Axis Gold, Kotak Gold or SBI Gold, conducting thorough research and aligning your investments with your financial goals are crucial.

FAQs

How Do Gold Mutual Funds Differ From Gold ETFs?

Gold ETFs require a Demat Account and are traded on stock exchanges, while gold mutual funds don’t need one. Mutual funds invest in ETFs on your behalf, making them simpler and more accessible for beginners.

How Do Gold Mutual Funds Work?

Gold mutual funds pool investors’ money to invest in gold ETFs, which track real gold prices. You don’t own physical gold but benefit from price changes. They are professionally managed, liquid, and allow small, regular investments through SIPs.

What Is Gold Mutual Fund Taxation?

Gold mutual funds in India are taxed like debt funds. Selling before 3 years makes gains short-term, taxed as per your income slab. After 3 years, they are long-term gains, taxed at 20% with indexation. No TDS is cut, but taxes must be declared in ITR.

Who Should Invest In Gold Funds?

Gold funds are ideal for beginners, small investors, or those who want portfolio diversification without buying physical gold. They are a decent choice for investors who are looking for inflation protection, long-term wealth safety, and easy liquidity with lower risks.

Which Are The Top Gold Funds To Invest In 2025?

Some of the preferred gold mutual funds of 2025 include ICICI Prudential Gold Fund, Nippon India Gold Savings Fund, and HDFC Gold Fund. Always review fund performance, expense ratio, and suitability before investing, as returns depend on gold’s price movements.

How Long Should I Stay Invested In Gold Funds?

Gold funds work best when held for at least 3–5 years. This helps you benefit from long-term gold price growth, inflation protection, and portfolio stability, reducing short-term volatility risks.

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