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Summary
In much of India, gold is an integral part of the household financial playbook. But the cultural context has been evolving in ways that make it easier to deploy vast private holdings—among the world’s biggest—for productive economic purposes.
India’s relationship with gold is entering a new phase. For decades, gold was viewed largely as a macroeconomic problem, a major import that widened the current account deficit and increased dependence on volatile foreign capital. But the global environment has changed sharply. Today, gold sits at the intersection of geopolitics, household finance, inflation, currency stability and economic resilience.
The question is no longer whether Indians buy ‘too much’ gold. The more important question is whether India can redesign its gold economy for an era of prolonged global uncertainty.
That shift matters because the world economy itself is becoming structurally more volatile.
Wars in West Asia and Eastern Europe, supply chain fragmentation, shipping disruptions and energy insecurity have created what economists increasingly describe as a “higher risk global order.”
In such periods, gold traditionally serves two functions simultaneously: as a global safe-haven asset for investors and a safe store-of-value for households seeking to protect savings against uncertainty.
India is uniquely exposed to both these forces. As one of the world’s largest importers of crude oil and gold, the country remains highly sensitive to global commodity shocks. Higher oil prices worsen inflation and pressure the rupee.
Rising gold prices create another layer of vulnerability because India imports hundreds of tonnes of bullion annually, making gold one of its largest non-oil imports. But unlike oil, gold imports are not merely a consumption story. They are deeply tied to household savings behaviour, and that is what makes India’s gold challenge structurally different.
Recent PRICE research based on a nationally representative survey (ICE 2022-23) of more than 43,000 households across 25 states and Union territories shows just how deeply gold is embedded in India’s economic system. More than 85% of Indian households own gold in some form. Ownership cuts across income groups, geographies and social categories, challenging the assumption that gold is primarily a luxury asset.
The reason is simple: for millions of households, gold performs functions that formal financial systems do not fully replicate.
The survey shows that lower middle-class households earning below ₹10 lakh annually continue to prefer gold alongside fixed deposits, Life Insurance Corp policies and Public Provident Fund investments because they prioritize stability and capital protection over high returns.
Even wealthier households, despite greater exposure to equities and real estate, tend to hold gold as a portfolio diversifier and uncertainty hedge.
In effect, gold acts simultaneously as savings, collateral, emergency liquidity, inflation protection and inter-generational wealth transfer. In many rural and semi urban households, it functions as a decentralized financial security system.
That explains why gold demand has remained remarkably resilient despite financial market deepening. The survey notes that after 2016’s demonetization, 2017’s GST implementation and the 2020 covid shock, nearly 75% of households continued to buy gold.
More importantly, nearly 80 to 90% of motivations behind gold ownership are financial (from security and liquidity to collateral value and long-term savings), while cultural and status considerations play a secondary role.
This distinction is critical because it changes how gold demand should be understood. In much of India, gold is not simply discretionary consumption. It is household level financial infrastructure.
The nature of the market reinforces this reality. More than 85% of gold transactions are through cash payments, particularly among lower- and middle-income households. Purchase decisions are driven more by trusted jewellers, family networks and personal experience than by institutional certification or formal advertising.
This has created a trust-based gold ecosystem that formal financial products have struggled to replicate.
At the same time, gold remains deeply woven into India’s social economy. Around 60 to 70% of gold purchases are linked to weddings and festivals, making demand relatively price inelastic and seasonally concentrated. Jewellery is the dominant form of ownership, though coins and bars are increasingly viewed as investments.
During periods of stress, households continue to monetize gold primarily through local jewellery shops rather than formal financial institutions because they offer speed, familiarity and easier liquidity.
This is where India’s gold economy presents both a challenge and an opportunity. The first is macroeconomic. Large gold imports increase external vulnerability, especially if geopolitical instability raises oil prices, weakens currencies and disrupts global trade flows.
In a more fragmented global economy, such vulnerabilities are harder to manage. But the opportunity is equally significant.
India is estimated to hold one of the world’s largest privately owned gold stocks, much of it lying outside formal financial intermediation. If even a portion of these holdings could be integrated into the formal economy through trusted monetization systems, India could reduce import dependence while expanding domestic liquidity.
That is why the next phase of policy is likely to focus less on discouraging gold ownership itself and more on redesigning systems around household behaviour.
India already has the foundation of such a framework through sovereign gold bonds, gold exchange traded funds, hallmarking reforms and the Gold Monetisation Scheme. Yet adoption remains uneven because physical gold still offers advantages that financial substitutes do not fully replicate: universal acceptance, emotional ownership, informal liquidity and, above all, trust.
The challenge, therefore, is not eliminating gold from household portfolios but integrating it more productively into the formal economy.
Three parallel shifts could see this transition unfold: expanding financial gold alternatives for higher income households, improving low-friction monetization systems for existing gold stocks and strengthening broader financial confidence among households. The last point may be the most important because the survey identifies trust as the basic organizing principle behind gold ownership.
Ultimately, gold’s persistence tells a larger story about India’s economic transition. In a world of geopolitical fragmentation and uncertainty, tangible stores of value are unlikely to lose relevance quickly. Even central banks globally have expanded gold reserves in recent years as protection against financial volatility and sanctions-related risks.
For India, the long-term goal is unlikely to be a complete reduction in the importance of gold. The larger challenge will be integrating gold more productively into the formal economy while reducing the external vulnerabilities associated with large-scale imports.
Gold is no longer merely a commodity or cultural asset today. It is becoming part of the architecture of economic resilience.
The author is managing director and chief executive officer of People Research on India’s Consumer Economy.
About the Author
Rajesh Shukla
Dr Rajesh Shukla is Founder Director and CEO of People Research on India’s Consumer Economy (PRICE) at the Indian Institute of Management Udaipur. He is an applied statistician and public policy researcher with more than three decades of experience in designing and implementing large-scale, nationally representative household surveys and statistical systems.<br><br>His work focuses on household income, consumption, savings, inequality, labour markets, financial inclusion, and the broader dynamics of India’s consumer economy. He has led over 35 pan-India primary and secondary data-based studies, including multi-stage stratified surveys and longitudinal research, and has played a significant role in strengthening India’s statistical evidence base.<br><br>Dr Shukla spent nearly two decades at the National Council of Applied Economic Research (NCAER), where he held senior positions including Chief Statistician and led the Centre for Macro Consumer Research. He has contributed to several Government of India expert committees and working groups related to household income measurement, savings and investment estimation, and National Sample Survey methodologies.<br><br>He has authored more than 50 policy research reports, several books, and peer-reviewed papers, and has written extensively in leading financial dailies on issues of inequality, public finance, and economic policy. His work has also involved collaboration with international institutions such as the United Nations World Tourism Organization, Asian Development Bank, and leading global academic networks.<br><br>At PRICE, he leads the ICE360 surveys, one of India’s largest independent household datasets, designed to provide granular and high-quality evidence on how Indian households earn, spend, save, and live. His work is grounded in a strong commitment to methodological rigour, transparency, and the use of data to inform public policy and public discourse.
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