All that glitters may not hold: India’s enduring obsession with gold could face a real-world test
Gold above ₹1 lakh per 10gm has not dampened India’s appetite—families keep buying, convinced of its ornamental value as much as its utility as an investment portfolio hedge. But how durable will gold’s price upshoot prove?
Gold has always held a singular place in India’s social and economic imagination. It is ornament, investment, inheritance and informal insurance all at once. Yet, this festive and wedding season, India confronts a paradox.
In major centres, the price of 24-karat gold has broken above ₹1 lakh per 10gm, with expectations that it could push toward ₹1.4 lakh in the near term. Still, households continue to buy—driven partly by ritual and partly by the conviction that high prices only validate its safe-haven role.
That cultural attachment remains powerful, but it now collides with the strains of macroeconomics, business adaptation and household constraints.
Globally, the rally has been underpinned by safe-haven demand, central bank accumulation, inflationary pressures and weakness in the US dollar. These forces have propelled benchmark prices higher, translating into domestic records in India. Locally, the dynamic is paradoxical. When prices soar, economic logic predicts demand contraction.
Yet, Indian families often interpret the rally as a signal to buy more—‘If tomorrow’s prices will be higher, better buy now.’ Beneath this fervour, however, lies a structural shift in demand.
The PRICE ICE 360 survey of 2023 highlights how deeply embedded gold is in Indian life. Covering over 40,000 households across 25 states, it found that nearly 87% own some gold, and 12% (36 million households) said they had purchased gold in 2023 cutting across every income group.
What differs is the purpose and ticket size: the affluent use it for ornamental value or as a portfolio hedge; the middle-class blends adornment with investment; and poorer families see it more as a sign of wellness, often buying it for ceremonies or gifting at marriages, rather than as a financial asset. The variation in average annual purchases is also striking—about ₹7,000 for poor households, ₹3.69 lakh for middle-class families and nearly ₹9.41 lakh for the rich.
Gifting, meanwhile, runs across the income spectrum, symbolizing security, goodwill and status. Only 3% of the lowest-income households had pledged gold for loans, compared with over 12% among better-off households.
Far from being a ‘rich man’s product,’ gold in India is a democratic asset—part aspiration, part necessity—whose meaning and scale shift with income, but whose presence is near-ubiquitous.
Research on income elasticity reinforces this picture. Studies show that India’s gold demand is highly responsive to rising incomes, especially for jewellery, while investment forms are more stable. A 1% rise in income yields nearly a 0.9% rise in demand, close to unit elasticity. PRICE’s surveys mirror this: as incomes rise, affluent families buy heavier ornaments, while lower- and middle-income households lean toward lighter pieces, coins or digital gold.
Similar patterns appear in China, Turkey and West Asia, where gold doubles as both ornament and hedge. Across these societies, gold acts as both luxury and necessity, expanding broadly with income growth rather than being concentrated among elites.
The psychological and social dynamics further complicate the picture. For generations, purchases during Diwali, Dhanteras and weddings have been non-negotiable.
That obligation remains, but it is now rationalized in financial terms. Families justify high prices by treating gold as an appreciating asset. Many compromise by buying lighter designs, smaller units or recycling old jewellery. What was once adornment is now increasingly framed as portfolio reallocation, even if it stretches household budgets.
For businesses, the shift is both a threat and an opportunity. Jewellers must adapt by offering lighter, modular designs that keep ticket sizes manageable. Transparent pricing—separating gold value from making charges—is no longer optional. Retailers that build partnerships with digital gold platforms or exchange traded funds (ETFs) can retain consumer loyalty even when physical jewellery sales soften.
Importers and bullion traders, meanwhile, must contend with high domestic premiums, fuelled by import duties and inefficiencies. Smarter hedging and leaner supply chains are essential to ease the burden on consumers.
Financial institutions and fintech firms are also reshaping the market. Gold-backed exchange-traded funds, sovereign bonds and digital wallets give households exposure without storage costs or making charges. Some lenders are experimenting with gold-linked credit, letting families monetize holdings or stagger payments. But such financialization demands responsibility: clear disclosure, consumer education and safeguards against the perception that gold is a risk-free bet.
At the macro level, gold is both a shield and a strain. It protects households from inflation and currency swings, yet excessive allocation diverts savings from more productive assets. For policymakers, this creates trade-offs: high import duties safeguard reserves but also inflate prices and encourage parallel channels.
Smarter tools—such as countercyclical tariffs, regulated scrap recycling and stronger hallmarking and certification—can temper extremes and protect consumers. The broader task is to balance cultural demand with financial stability, while improving literacy so that households across income groups can manage price volatility more wisely.
For consumers, prudence is paramount. Buying gold at the current rate may feel like a hedge, but over-extension is perilous. Smaller, staggered purchases, lighter designs and calibrated choices between ornamental and investment use are safer. ETFs and sovereign gold bonds offer exposure without storage headaches, while borrowing at high interest to buy gold should be avoided—even under cultural pressure.
Ultimately, evidence from PRICE and global studies points to one truth: gold is not merely a luxury, but a democratic asset whose demand grows with income across society. India’s love of gold will endure, but the present surge is a reminder that even timeless assets are bound by economic laws.
Transparency, innovation and discipline—by policymakers, businesses and households alike—will determine whether gold will continue to shine as a sustainable pillar of household finance or act as a speculative trap.
The author is managing director and chief executive officer of People Research on India’s Consumer Economy.
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