Indian households own gold worth $4.5 trillion. Can it boost spending?

Gold prices: Indians have long had a deep affinity for gold. The latest surge in gold prices has turned that cultural preference into a significant financial windfall, sharply lifting the value of the yellow metal accumulated by households over decades.

As per UBS' estimates, India has the largest stock of gold in the world, with 28,000 tonnes held by households, including temples.

With gold prices rising at a 42% CAGR between FY24 and FY26 (as of end-January), the value of gold held by Indian households is now estimated at around $4.5 trillion, according to UBS — exceeding India’s nominal GDP of roughly $4 trillion in FY26.

However, unlike high equity returns (NIFTY TRI) during FY21-FY23 (26% CAGR), which significantly boosted urban demand toward discretionary consumption and supported real estate demand, the wealth locked in gold is not expected to translate into broad consumer spending.

Cultural preferences and the perception of gold as a safe haven mean households generally hold rather than sell their gold, even when prices are at record highs. That said, households increasingly use gold loans to access cash and meet their consumption needs while retaining ownership of physical gold.

Since gold is a long-term asset, it will primarily boost borrowing rather than outright liquidation.

Gold loans boom & impact on consumption

RBI data shows that banks and NBFCs together extended $20 billion and $23.4 billion of loans against gold and gold jewellery in FY25 and FY26YTD, respectively, compared with an annual average of just $3 billion during FY22–FY24.

Notably, this sharp upswing in the gold loan segment has been supported by record high gold prices, a broader shift by lenders toward secured retail credit, aggressive expansion by both banks and NBFCs and lower interest rates than alternatives like MFIs, said UBS.

Echoing similar views, Madan Sabnavis, Chief Economist at Bank of Baroda, said that gold is held more as a permanent asset or as a long-term investment in India. Therefore, we cannot expect an outright consumption boost amid a sharp surge in the gold value of Indian households.

"That said, what we have observed is that many people who bought gold by paying cash are now using it to borrow money from banks. Gold loans have increased, and the loan-to-value ratio is around 80% or so. This allows borrowers to access a higher amount of credit from banks. This borrowed money is then being used for consumption purposes," he opined.

According to analysts, this effect is particularly important for low-income households, which draw on gold as both a savings asset and collateral, helping smooth spending and financial needs when incomes fluctuate.

"We think most gold loans would likely be spent on business-oriented needs (working capital requirement and funding gaps of traders, small businesses, agriculture), rural consumption (including weddings), education and health care," said UBS.

Gold jewellery demand to decline 15%

Meanwhile, with the rising gold prices, the global brokerage expects the gold jewellery demand to slow down. In its base case, UBS estimate India's gold demand (jewellery and retail investment) to moderate to c.670 tonnes in FY26 (-15% YoY) from 780 tonnes in FY25, largely led by lower jewellery demand.

For the following year, it expects India's gold demand to stabilise at close to 650 tonnes in FY27E with investment demand likely to remain a key driver.

Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions.