Over the past week, several large fund houses have rolled out prominent print and digital campaigns branding Gold ETFs as "secure," "regulated," and "transparent," seeking to tap investor concern and long-standing confusion around different gold-linked investment products.

The promotional burst follows a Securities and Exchange Board of India (Sebi) circular issued earlier this month that explicitly warned investors about the risks of digital gold, an investment avenue that has grown rapidly through smartphones and UPI-led platforms but sits outside the securities regulatory framework.

With Sebi drawing clear boundaries between regulated and unregulated gold products, mutual funds see an opportunity to draw investors into their ETF offerings, though it may still be too early to gauge whether investor behaviour will shift.

Advertisements from major players such as HDFC Mutual Fund and Nippon India Mutual Fund lean heavily into themes of compliance, liquidity and formal exchange-based trading, using visuals of gold bars alongside taglines such as "gold you truly hold."

The Nippon MF advertisement states: "The market is full of 'digital gold' products with varying levels of safety and transparency. If you want to opt for a gold investment product that is transparent and regulated, has investor protection mechanism and is backed by physical gold with 99.5% purity, then gold ETF is the answer."

Gold ETFs allow investors to gain exposure to gold through the stock market while being backed by physical metal. There are currently 22 such ETFs across fund houses, collectively managing assets worth ₹1.02 trillion. The category recorded inflows of ₹7,743 crore in October alone, according to the latest data from the Association of Mutual Funds of India (Amfi), marking the third straight month of net inflows.

Investors who do not hold demat accounts can gain exposure through gold fund-of-funds (FoFs), which buy ETF units on their behalf. Multi-asset mutual funds also allocate a portion of their portfolios to gold ETFs, offering indirect exposure.

Emails to HDFC mutual fund and Nippon India MF did not elicit a response.

Sebi's warning

The current push by fund houses began shortly after Sebi's 8 November circular, which cautioned investors about digital gold platforms. The regulator clarified that digital gold is neither categorised as a security nor as a commodity derivative and emphasised that such products "operate entirely outside the purview of Sebi." The notice added that "such digital gold products may entail significant risks for investors and may expose investors to counterparty and operational risks."

Following the circular, the India Bullion and Jewellers Association (IBJA) wrote to Sebi urging the regulator to bring digital gold under its ambit. The association told Mint that it may approach the central government if Sebi declines to regulate the segment.

A top executive at an asset management company (AMC), speaking on condition of anonymity, said the regulator's stance reflects rising unease about the scale of activity outside formal oversight. "Investments into digital gold are becoming bigger than expected. Sebi and the government are facing discomfort because of it," he said.

A major source of concern is that digital gold operates in a regulatory vacuum, overseen by neither Sebi nor the Reserve Bank of India, leaving buyers with limited recourse if a platform faces stress or collapses. The absence of formal oversight also means there is no uniform verification of the physical gold backing user holdings, especially among smaller providers. Pricing varies sharply across platforms because of markups, charges and payment gateway fees, which come on top of the 3% GST levied on gold purchases.

For mutual funds, this regulatory moment has opened a window to attract investors to a product category they have long tried to build. "It is a good time for mutual funds to show how ETFs can benefit investors. Such advertisements may help mutual funds increase their AUM," said Vishal Bedse, investment advisor at ICICI Investment Management Co. "More people switching from digital gold to gold ETFs would mean more money for the mutual fund."

Nippon India's new campaign illustrates this approach, placing digital gold and gold ETFs side-by-side across parameters such as Sebi regulation, investor-protection mechanisms, demat holding, and mandatory disclosures—showing ETFs scoring higher on each.

"We want people who want to invest in gold to come to gold ETFs, though gold is not a mainline investment product, it is a hedge," said D.P. Singh, deputy managing director and joint chief executive officer at SBI Mutual Fund.

Investor reality

Despite the industry's messaging blitz, investors have not yet begun moving away from digital gold, according to industry executives.

"We are not clear on whether more people would move to gold ETF as of now. We have to give it more time,"said the AMC executive quoted earlier. "A lot of people don't do due diligence or research. We are trying to tell them that ETF is also an option," he added.

"Inquiries for gold ETFs have not gone up. Investors are not expected to take overnight positions in gold," said Santosh Joseph, chief executive officer and managing director at Germinate Investor Service.

Investment advisors note that concerns around digital gold predate the Sebi circular. "I have never recommended digital gold as it is not very transparent and prices vary across platforms. The investors also have to pay an extra 3% GST if they invest in the product," said Bedse.

Yet digital gold continues to draw significant retail traction due to its low ticket size, often as little as ₹1 or ₹10, and ease of access. According to the National Payments Corp. of India (NPCI), UPI-based digital gold purchases surged from 50.93 million transactions in January—the first month NPCI began releasing this data—to 115.95 million in October. In value terms, UPI-driven purchases more than tripled, touching ₹2,290.4 crore.

Management consulting firm Technopak Advisors estimates that India's digital gold holdings stood at 25 tonnes in FY25 and are likely to double by FY30. For comparison, gold ETFs collectively held 77.4 tonnes of physical gold as of September, according to the World Gold Council.