SEBI Chairman Tuhin Kanta Pandey stated that restrictions on fresh investments in Gold ETF fund-of-funds schemes are temporary, not permanent policy. The curbs were imposed because underlying Gold ETFs hit prescribed investment limits under mutual fund regulations. SEBI is working with the government and RBI to resolve the constraint, which stems from overall portfolio limits on gold-linked instruments. The pause affects retail investors who access gold indirectly through fund-of-funds routes rather than buying Gold ETF units directly on exchanges.

A Gold ETF Fund-of-Funds (FoF) is a mutual fund that invests its corpus entirely into units of Gold ETFs rather than buying physical gold or equity directly. This structure allows investors without demat accounts to gain gold exposure through a regular mutual fund SIP or lump-sum route.

The regulatory constraint here arises from SEBI's investment limits on how much a mutual fund scheme can hold in a single underlying ETF or asset class. When Gold ETF schemes collectively approach or breach these concentration thresholds, SEBI mandates a halt on fresh inflows into the FoF that feeds into them. This is a prudential safeguard against over-concentration risk.

The broader context is that gold demand has surged sharply in 2024–25, driven by global uncertainty and rupee depreciation, pushing Gold ETF AUMs to record levels. The FoF channel, being the preferred route for SIP investors, bore the brunt of the restriction.

SEBI's assurance that the curb is temporary signals that a regulatory fix — possibly a revision of concentration limits, a new RBI dispensation for gold holdings, or an increase in permissible portfolio limits — is under consideration. The episode illustrates how product-level restrictions in capital markets can be triggered not by fraud or misconduct, but purely by structural portfolio ceiling limits hitting their bounds.