In India, the wealth of households in gold is estimated at 34,600 tonnes, valued at approximately $3.8 trillion (Rs 337 lakh crore), which represents 88.8 percent of the country’s GDP. This has created a favorable wealth effect on household balance sheets, especially as gold prices reach new heights, according to a Morgan Stanley report released on Friday. Current gold prices are at record levels, trading around $4,056 per ounce, with domestic prices also peaking at about Rs 127,300 per 10 grams. Year-to-date, gold prices have surged by 54.6 percent in US dollar terms and 61.8 percent in INR terms, the report indicates.
Households’ growing preference for financial assets has led to an increase in gold investments through ETFs, with ETF flows amounting to $1.8 billion over the past year. This trend is expected to persist. India is the second-largest gold consumer globally, accounting for approximately 26 percent of the worldwide demand, following China at 28 percent. While household consumption has historically driven this demand, there has been a notable rise in central bank purchases recently. The Reserve Bank of India (RBI) has increased its gold reserves by about 75 tonnes since 2024, bringing its total to 880 tonnes, which now represents around 14 percent of India’s total foreign exchange reserves.
Although the value of gold consumption has risen to $68 billion on a trailing four-quarter basis as of June 2025, the volume of consumption remains stable at around 767 tonnes, significantly lower than the peak of 1,145 tonnes recorded in June 2011. A stable inflation rate averaging 5 percent year-on-year since the implementation of the flexible inflation targeting framework in 2016, along with positive real interest rates averaging 1.7 percent since the normalization of policies post-pandemic, has helped keep gold imports within 1-1.5 percent of GDP. This is notably lower than the peak of 3.3 percent of GDP observed in May 2013.
Strong macroeconomic stability has prevented households from excessively favoring savings in physical assets, thus helping to contain gold imports and alleviate pressure on the current account deficit.