Mutual Funds Suspend New Investments in Gold FoFs Effective October 16
Major mutual fund houses have halted new investments in gold ETF fund-of-funds, impacting investors amid rising gold demand.
Top mutual funds like ICICI Prudential and Kotak have stopped fresh investments in gold FoFs.
Existing investors can continue their SIPs and STPs without interruption.
The suspension is likely linked to the falling rupee and increased gold imports.
In a significant move impacting investors, several major mutual fund houses have announced a halt on new investments in their gold exchange-traded fund fund-of-funds (FoFs) starting October 16. This decision comes at a time when demand for gold typically peaks due to festive seasons. Notable fund houses including ICICI Prudential Mutual Fund, Kotak Mutual Fund, Axis Mutual Fund, and Tata Mutual Fund issued addendums on October 15, outlining the temporary suspension of fresh lump-sum investments, switch-ins, and new registrations for systematic investment plans (SIPs) and systematic transfer plans (STPs).
Other firms such as Aditya Birla Sun Life, DSP, and Invesco India have also placed restrictions on their gold FoFs, as indicated on their respective websites. A gold ETF FoF allows investors to gain exposure to gold through mutual funds rather than directly through ETFs, which require a demat account for investment.
The restrictions primarily affect new investments, including additional lump sums and new SIPs. However, existing investors are largely unaffected; their previously registered SIPs and STPs will continue to operate as planned, and redemptions or switch-outs remain unaffected. The fund houses have not specified when these restrictions might be lifted, with most notices indicating that the suspension will last until further notice.
While the official reasons for this decision have not been disclosed, analysts speculate that the depreciation of the Indian rupee, which has fallen approximately 7% this year due to rising oil prices and foreign selling of Indian equities, could be a contributing factor. Gold is a significant import for India, and the inflow into gold ETFs has surged recently. In September 2026 alone, gold ETFs saw inflows of Rs 4,450.61 crore, marking a 71% increase from the previous month, according to the Association of Mutual Funds in India (AMFI).
For investors currently utilizing gold FoF SIPs, there is no immediate cause for concern as their investments will proceed as scheduled. Those looking to invest in gold can still purchase gold ETFs directly on the stock exchange through a demat account, which are not subject to these restrictions. However, caution is advised, as demand shifts to the exchange could lead to ETF units trading at a premium. This pause also presents an opportunity for investors to reassess their portfolio allocations, as financial planners typically recommend limiting gold investments to 10-15% of a portfolio for diversification purposes.
