India Needs Long-Term Gold Policy, Says SBI Report Amid Global Gold Rush

A State Bank of India (SBI) report has pitched for a comprehensive national gold policy on the back of sharp spike in gold prices. It notes India as one of the largest bullion markets in the world, shaped

by its deep-rooted cultural affinity for the metal and strong investment demand.

According to the SBI Economic Research Department’s report titled “Coming Of (A Turbulent) Age: The Great Global Gold Rush”, the surge in gold prices has been fuelled by geopolitical tensions, global economic uncertainty, and a weakening US dollar, PTI reported.

The yellow metal has gained over 50 per cent so far in 2025, briefly dipping below $4,000 per ounce in October before rebounding above that mark in November.

The study highlighted that India’s domestic gold supply forms only a small portion of its total demand, with imports accounting for nearly 86 per cent of total supply in 2024, as per World Gold Council estimates.

India ranked second globally in consumer demand for gold, with 802.8 tonnes in 2024 — roughly 26 per cent of global demand — just behind China, which recorded 815.4 tonnes.

“Cherished by households, cheered by investors, hoarded by central banks and feted by speculators, the recent journey of the shiny metal has been straight out of a storybook,” the report observed, while also warning that gold’s rise acts as a “fear gauge of the tempest waiting on the sidelines.”

Heavy Dependence On Gold Import

SBI’s research team underlined that India’s heavy dependence on gold imports also makes the gold price and rupee exchange rate highly correlated, with a coefficient of around 0.73, meaning higher gold prices tend to be associated with rupee depreciation.

Citing China’s example, the report said the country’s national gold policy serves a defined purpose, adopting a comprehensive framework for trading, storing, valuing, and using gold in international commerce — aligning with its broader economic and geopolitical goals.

In contrast, SBI noted that India’s gold policy discussions since 1978 have largely focused on discouraging physical gold holdings, which have been short-term in nature.

“The time has now come to conceive a comprehensive policy on gold,” the report said, adding that India must clearly define whether gold is a commodity or money and understand how it is perceived by its ultimate consumer.

It suggested that while current policy measures largely aim to reduce demand and encourage recycling, the monetisation of gold could play a positive role in supporting future investments.

Gold-Backed Pension Scheme

The report also proposed exploring a gold-backed pension scheme that could be integrated with broader financial reforms and the goal of eventual capital account convertibility.

SGB Out, ETFs In

As per the SBI study, policy tools such as Sovereign Gold Bonds (SGBs) have offered alternatives to physical gold, but have also added to government debt — with capital loss on outstanding SGB units estimated at Rs 93,284 crore.

At the same time, rising returns from gold have drawn strong investor interest in gold exchange-traded funds (ETFs). Inflows into gold ETFs rose 2.7 times in FY25 (April–September) and 2.6 times in FY26, taking total assets under management to Rs 901.36 billion as of September 2025, marking a 165 per cent year-on-year jump, PTI cited the report as saying.