Commodity funds are mutual funds or ETFs that provide investors with exposure to commodity prices — including precious metals (gold and silver), energy (crude oil, natural gas), agricultural products, and industrial metals — without requiring direct ownership of physical commodities or commodity futures contracts. In India, the most widely invested commodity funds are Gold ETFs (which hold physical gold as the underlying asset), Gold Funds of Funds (which invest in Gold ETFs), Silver ETFs (introduced in 2022), and multi-commodity funds. SEBI categorises these under the 'Other Schemes' category of mutual funds. Gold ETFs have historically been the dominant commodity fund category in India — tracking domestic gold prices and providing investors with a cost-efficient, regulated alternative to physical gold with no storage risk, making charges, or purity concerns. Commodity funds serve as inflation hedges and portfolio diversifiers since commodity prices often move independently of or inversely to equity market performance. For Indian retail investors, commodity funds — particularly gold-linked products — have become an increasingly important component of asset allocation, particularly during periods of equity market uncertainty and elevated global inflation.
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