India’s enduring obsession with gold has entered unprecedented territory. As global prices scale record highs, the sheer value of gold held by Indian households
may now exceed the size of the country’s entire economy. International spot prices recently surged beyond $4,500 per ounce, pushing the valuation of India’s privately held gold to extraordinary levels. According to Morgan Stanley, Indian households collectively own around 34,600 tonnes of the precious metal. At recent peak prices of roughly $4,550 an ounce, that stockpile is worth over $5 trillion. In comparison, India’s GDP is estimated at about $4.1 trillion by the International Monetary Fund (IMF). This contrast underlines gold’s unique position in Indian society. As the country accelerates toward becoming the world’s third-largest economy, its citizens continue to park vast wealth in an asset that predates modern finance by centuries. "It is a striking statistic that invites deeper reflection rather than a literal comparison," Dr Manoranjan Sharma, Chief Economist at Infomerics Valuation and Ratings, told ET Markets. "While GDP is a flow variable and gold holdings are a stock, the contrast nevertheless highlights the extraordinary cultural, financial, and psychological importance of gold in the Indian economy," he added. Does Rising Gold Create Real Wealth? Some economists argue that swelling gold valuations strengthen household balance sheets. Morgan Stanley previously noted that "the stock of holdings of gold provides a positive wealth effect for the household balance sheet, which is also benefiting from cyclical factors of lower interest payments with monetary policy easing and a positive impact on disposable income through direct and indirect tax cuts." Yet this view is contested. Research by Emkay Global suggests gold rallies have historically failed to boost consumption. Their analysis shows households rarely reassess gold values like financial assets, limiting any wealth effect. With nearly 75–80 per cent of holdings locked in jewellery, gold is treated as a hybrid of savings and consumption rather than spendable wealth. From Households To Central Banks India remains the world’s second-largest gold consumer, accounting for about 26 per cent of global demand, according to the World Gold Council. While jewellery dominates usage, investment demand through bars and coins has risen sharply over the past five years. The Reserve Bank of India has also increased its exposure, adding around 75 tonnes since 2024. Total reserves now stand at 880 tonnes, forming nearly 14 per cent of foreign exchange reserves. "For nearly eight decades, since the emergence of the Bretton Woods financial architecture, gold and the US dollar have occupied a unique position as global safe-haven assets," Sharma explained in the ET report. "In periods of heightened global or domestic uncertainty, wars, financial crises, inflationary episodes, or geopolitical stress, investors and households instinctively gravitate toward these two stores of value." Gold’s Policy Paradox Despite its appeal, gold poses challenges. "From a purely economic standpoint, gold is largely an idle and unproductive asset," Sharma said. Policymakers have tried nudging savers toward gold ETFs and sovereign bonds, but with limited success. "Understanding this phenomenon requires moving beyond simplistic judgments and appreciating gold's complex role as both a financial asset and a deeply embedded social institution," Sharma said in the report.
