Gold selling at Rs 1,10,000 per 10 grams in all cities – the shimmer of that headline number is not just a market statistic. For millions of aspirational middle-class and lowermiddle-class households across India, it is a blow that lands in the very places where promises and securities are stored: weddings, festivals, the small iron safe in the corner of a bedroom, or the handful of coins kept aside for an emergency. Gold – once a ritual, a relish, an intergenerational contract of security and social belonging – has been recast as a commodity for markets, a tradeable instrument whose rise has both enriched some and eviscerated others’ dreams.
This is not merely finance-speak. Consider the lived arithmetic: where a bridal family of 2015 could plan modestly with prices around Rs 25,000-30,000 per 10 grams, they now confront a figure approaching four times that level. The immediate human consequence is unambiguous. The households that planned for marriages, festivals, and rites through the slow, culturally sanctioned accretion of gold have seen that plan has become unaffordable. The social ritual of gifting gold, considered a marker of status and security, is fraying at the edges.
At the same time, on the stock exchange and in the vaults of global custodian banks, gold has become an active financial asset. Exchange-traded funds and sovereign instruments now convert the once-intimate act of buying a gold bangle into a tradeable, liquid position. In India, the assets under management of gold ETFs have surged dramatically over the last couple of years to a whopping Rs 60,000-65,000 crore, roughly 40-50 tonnes of gold equivalent Meanwhile, sovereign gold bonds and digital ‘paper gold’ platforms have widened the investor base.
What once used to be a market of artisans, jewellers and families is increasingly populated by institutional players and retail savers seeking market returns or portfolio diversification. This transformation from heirloom to an asset class is neither accidental nor sudden. It is the product of a decade of converging forces, domestic and global, that are reshaping gold’s price and role in modern portfolios.
Domestically, the story begins with demand that has been stubbornly resilient. Despite price surges, jewellery and ceremonial demand in India has remained significant. Rough estimates place India’s annual gold demand in the neighbourhood of 700-800 tonnes, sustaining 70-75 per cent of domestic consumption. A second domestic driver for price rise is the rupee. Every depreciation of the rupee against the dollar translates into an immediate rupee-price increase at retail counters, because most bullion trade is dollar-denominated. In recent years, the rupee’s depreciation – from the mid60s/70s per dollar a few years back to around 87 now – has acted as an accelerant. Policy uncertainty around import duties, occasional regulatory moves and the spectre of taxes or changes in GST treatment have also nudged buyers to bring purchases forward or hoard physical gold – tidy mechanics that exacerbate price spikes.
A tectonic shift
On the international front, buying by central banks like the RBI has seen a tectonic shift. Countries that once treated gold as a relic have, over the past decade, added sizeable reserves, partly as a hedge against geopolitical tensions, partly as diversification away from dollar-centric holdings.
Premiums in certain quarters have been driven by large sovereign purchases that reduce the pool of gold available for private hands. What about supply? Here, the argument that “we are running out of gold” is inaccurate. Global mine production has grown slowly by a per cent or two a year in normal time because new mines take years to discover, permit, and develop. In numeric terms, the gap between the global demand and supply hasn’t widened much. For example, total global demand around 5,000 tonnes in recent years has matched supply.
This brings us to the crux of the moral and economic dilemma: is gold the new ‘bold’ investment, a stabiliser in an uncertain financial world, or has it been co-opted into speculative machinations that erode its social function? The answer, inconvenient as it is, is both. For investors and institutions, gold has matured into a visible, tradeable hedge. During periods of equity market stress or when inflation fears become palpable, gold has provided portfolio ballast and, in many years, superior returns.
Different dynamics
Consider the decade: a four-fold increase in the rupee-price of gold, translating into double-digit annualised returns, has left many longer-term holders materially better off. But for the aspirational middle and lower middle classes who historically relied on small, frequent purchases to secure future security, the dynamics are different. The commoditisation of gold, and its ascendancy as an institutional asset class have shifted price discovery away from local markets to global flows. The result: jewellery meant to celebrate life events is now priced by capital flows and macro decisions made on trading floors thousands of miles away. In short, the sociocultural anchor that gold provided has been partly displaced by market logic.
Is this bad? Not necessarily. Markets allocate capital efficiently; the re-direction of demand towards financial instruments lowers transaction costs, enhances liquidity, and gives small savers more tools. For those who want pure price exposure, gold ETFs and sovereign gold bonds are excellent vehicles. Problem arises when financial logic crowds out cultural needs without policy or market tools to protect the less privileged. When a young couple cannot afford the family-planned gold treasure for a marriage, or when elderly households feel their store of value is suddenly out of reach for their children, social repercussions are bound to follow.
Uniquely vulnerable
Where does India fit in this new configuration? Uniquely placed and uniquely vulnerable? Because of her cultural connectivity with the yellow metal, India is still the largest or second-largest consumer of gold globally. But India is also integrating quickly into global financial architectures.
That duality of cultural affinity and market integration can become a policy lever. Policy can help, too. Reducing frictions in SGB subscription channels, incentivising smaller denominations, and ensuring transparent, low-cost access to ETFs for small savers can prevent the ‘exclusion by price’ phenomenon from worsening. If India can marry its cultural heritage with modern financial instruments by making alternative, low-cost access to gold pervasive and by cushioning the most vulnerable through credit and social programmes the country can retain gold’s social function while also integrating into a market those lights up the price lamp in real time.
Pivotal moment
As gold continues its ascent as both a financial asset and cultural emblem, India faces a pivotal moment. Policymakers, markets, and communities must collaborate to ensure that gold’s transformation into a market-driven instrument does not marginalise the very households for whom it has long been a symbol of security. By expanding access to affordable financial instruments, promoting transparent investment channels, and preserving cultural traditions, India can position itself at the intersection of heritage and global markets.
In the coming decade, gold could simultaneously anchor social stability and fuel investment portfolios, shining as both a safeguard for families and a bold instrument of economic resilience.
