India's Gold Treasure: A $3.8 Trillion Wealth Phenomenon: Morgan Stanley

India's household gold reserves have surged to $3.8 trillion in 2025, driven by a 62% rise in gold prices, now nearly 89% of GDP. With 34,600 tonnes of gold, India is the second-largest global gold consumer. Despite increasing financial asset investments, gold remains a key wealth driver amid economic uncertainty. Jewelry dominates demand, while retail investment grows. Central banks and geopolitical tensions also boost gold's appeal, solidifying its role in household portfolios.

India's household gold reserves have skyrocketed to an estimated $3.8 trillion in value, following an extraordinary 62% surge in gold prices in 2025. This increase has propelled gold's worth to nearly 89% of the country’s GDP, solidifying its role as a cornerstone of household wealth and a hedge against economic uncertainty. Indian families, traditionally inclined toward physical assets, have seen their wealth expand significantly, even as their gold consumption volumes remain largely stable.

With global gold prices breaking records at over $4,000 per ounce and domestic rates reaching approximately ₹1.27 lakh per 10 grams, Indian households now own one of the largest private gold reserves worldwide. The current holdings, valued at more than three times the country's total equity wealth, underscore the enduring appeal of gold as a secure investment.

A Glimpse into India’s Gold Holdings

Morgan Stanley's latest report reveals that Indian households collectively hold around 34,600 tonnes of gold, cementing India's position as the world’s second-largest gold consumer, just behind China. At current market values, the worth of these gold holdings is approximately 3.1 times the equity stock owned by Indian households, estimated at $1,185 billion.

Despite a steady annual gold consumption range of 750-840 tonnes since 2021—well below the 2011 peak of 1,145 tonnes—the soaring domestic gold prices have driven consumption in value terms to an all-time high. As of June 2025, gold consumption in India reached $68 billion on a four-quarter trailing basis, a sharp rise from $44 billion in June 2023. This figure surpasses the previous record of $55 billion set in June 2013, which was largely driven by higher volumes.

Gold prices have surged by 54.6% globally and a remarkable 62% domestically in 2025, partly fueled by the rupee’s 3.8% depreciation. The weakening currency has amplified domestic gold prices and enhanced rupee-denominated returns for investors.

India’s Growing Share in Global Gold Demand

India continues to be a dominant force in the global gold market, accounting for 26% of global gold demand as of June 2025, compared to a five-year average of 23%. This places India second only to China, which commands 28% of demand. Jewelry remains the primary driver of gold consumption in India, contributing two-thirds of the demand. However, retail investment in bars and coins has seen significant growth, rising from 23.9% in 2020 to 32% in 2025.

With negligible domestic gold production—around 2% of total demand, primarily sourced from the Hutti Gold Mine in Karnataka—India depends heavily on imports from countries like Switzerland, the UAE, and South Africa. This reliance makes India the second-largest gold importer globally, trailing only China.

Gold’s Role as a Safe Haven in Uncertain Times

The current rally in gold prices mirrors past trends during crises, such as the 2008 global financial crisis and the 2020 COVID-19 pandemic. The heightened demand for gold as a safe-haven asset often accompanies geopolitical and economic turmoil. In 2025, factors like political instability in France, the U.S. government shutdown, and ongoing Federal Reserve rate cuts have contributed to global financial market volatility, driving up gold prices.

Central banks worldwide have also bolstered their gold reserves, recognizing its importance as a reliable asset. Over the past decade, global central bank gold holdings have nearly doubled. India, in particular, has increased its gold reserves to 14% of the total in September 2025, up from 8.1% in September 2023.

The Shift Toward Financial Assets

While gold remains a vital store of wealth, Morgan Stanley notes that Indian households are increasingly shifting their savings toward financial assets. Lower inflation and positive real interest rates have tempered gold demand, as equities and other market-linked products gain popularity among retail investors. The share of equities in household financial savings has reached a record high of 15.1% in fiscal 2025, up from 8.7% in fiscal 2024 and just 4% pre-pandemic.

This trend is underpinned by factors such as favorable demographics, improved investor education, and supportive policy changes, including the allowance for retirement funds to invest in equities since 2015. Strategists anticipate that the value of equities relative to gold holdings will surpass one in the coming years, compared to the current ratio of 0.3.

Balancing Tradition and Modernization

Despite the growing preference for financial assets, India's vast gold reserves continue to provide a significant wealth effect for households. This is further supported by cyclical factors such as reduced interest payments due to monetary policy easing and increased disposable income from tax cuts. As the financialization of household savings deepens, India’s economy is witnessing a gradual shift from traditional physical assets like gold to more diversified investment portfolios.

The enduring allure of gold, combined with the rise of financial assets, paints a dynamic picture of how Indian households are adapting their wealth strategies in response to evolving economic conditions.