Unlocking India's Gold ETF Vaults: A Futures-Based Path to Cut Imports Without Curbing Savers

By the end of March 2026, India's 26 gold ETFs were holding 115 tonnes of metal in vaults. The gold was worth about $18.5 billion, or ₹1.7 trillion. It was imported, duty-paid, assayed and insured, and it earned no yield while storage fees accrued every day. A partner at the advisory firm MCQube, writing in The Hindu Business Line, argues that this stockpile is a lever India has not yet pulled.

The backdrop is a government trying to restrain gold buying. The Prime Minister has asked Indians to stop buying gold, and the government has raised import duties on gold and silver from 6 per cent to 15 per cent to cool demand and conserve foreign exchange. The author's point is that fear has only sharpened the appetite for gold, which households treat as insurance rather than consumption. Tariffs, he says, treat the symptom and not the cause.

The numbers he cites show the scale. Gold imports in January 2026 reached $12 billion, nearly triple December's figure, and gold ETF demand made up 16 per cent of that month's spending. Products meant to ease the physical import burden have become a major driver of it. Gold ETF assets under management rose 191 per cent, from ₹59,000 crore in March 2025 to ₹1.71 lakh crore in March 2026. Commodity ETFs drew larger inflows than equity ETFs for the first time. Bar and coin demand jumped 34 per cent to 62 tonnes in the first quarter of 2026, the strongest opening quarter since 2013.

The author separates two gold markets. Socio-cultural gold, tied to weddings, Akshaya Tritiya, Dhanteras and inheritance, is price-inelastic, and he says it should be left alone. Listed jewellers reported first-quarter 2026 revenue growth of 32 to 124 per cent. Investment gold is the part policy can reach. Each rupee flowing into an ETF obliges the fund house to buy physical metal, most of it imported.

His proposal rests on SEBI's own rules. ETFs were required to hold physical gold in 2006 because commodity derivatives sat outside SEBI's regulation. A May 2019 circular classed exchange-traded commodity derivatives on gold as eligible gold-related instruments and exempted them from the 10 per cent single-commodity cap. Current guidance lets Gold ETFs put up to 95 per cent of net assets in gold and gold-related instruments, including GDS, GMS and ETCDs. A February 2026 master circular required NAVs to be set from exchange-polled domestic spot prices, the same figure used to settle physically delivered gold derivatives. The author calls defending full physical backing today institutional inertia masquerading as prudence.

In practice, he says, asset managers would sell 5 to 10 tonnes at first through structured auctions to refiners, bullion banks and jewellers who would otherwise order from abroad. Each tonne sold at home never crosses customs. The proceeds would fund long positions in near- and next-month gold futures, preserving full price exposure. Because futures need only margin, surplus cash could earn 6-7 per cent in Treasury Bills or TREPS, a return investors forgo on vaulted gold.

He acknowledges a liquidity problem. Domestic gold futures open interest averages 16-18 tonnes, far below the 115 tonnes the ETFs hold. He proposes that no ETF hold more than 15-20 per cent of open interest in any contract month, with positions spread across maturities and rolls scheduled and capped. Exchanges would help with tighter spreads and fee waivers during rollovers.

For SEBI, he asks for no rewrite, only confirmation that a managed futures allocation is standard practice, plus factsheets that report physical holdings, ETCD exposure by month, the futures-spot basis and collateral returns. He notes that a few fund houses treat futures as reserved for rare situations. What to watch is whether any of them adopts a capped futures sleeve, and whether SEBI requires those disclosures.