India’s Golden Crossroads: SBI Report Calls for a Comprehensive Policy as Gold Prices Hit Record Highs

Gold prices have surged over 50% in 2025 amid global tensions and a weak US dollar. An SBI report urges India to create a comprehensive gold policy, reducing import reliance and clarifying gold’s economic role. With India importing 86% of its gold and holding 26% of global demand, stronger localisation, monetisation, and mining initiatives are essential.

As global gold prices continue their meteoric rise, the State Bank of India’s (SBI) Economic Research Department has sounded a clarion call for a unified national strategy on gold. In its latest report titled “Coming of (A Turbulent) Age: The Great Global Gold Rush,” the study highlights the growing interplay between geopolitical uncertainty, the weakening US dollar, and India’s deep economic and cultural ties with the precious metal.

A Relentless Rally in Gold Prices

Gold has emerged as one of 2025’s most sought-after assets, with prices climbing over 50% since the start of the year. Although the metal briefly dipped below $4,000 per ounce in October, it swiftly rebounded above that mark in November, reflecting persistent investor demand. The report attributes this surge to global instability, currency fluctuations, and gold’s traditional role as a refuge in times of economic distress.

India’s Enduring Love Affair with Gold

India remains the world’s second-largest consumer of gold, trailing only China. In 2024, Indian demand accounted for roughly 26% of global consumption—about 803 tonnes out of a global total led by China’s 815 tonnes. The country’s fascination with the metal is as much cultural as it is financial, driven by rituals, weddings, and the perception of gold as both a store of value and a shield against inflation.

Yet, the report notes that India’s heavy dependence on imports is a looming concern. Approximately 86% of the nation’s gold supply in 2024 came from abroad, underscoring a limited domestic mining capacity. In fact, only 1,627 kg of gold was mined domestically in FY25, highlighting the need for stronger self-reliance. Recent discoveries in Odisha, Madhya Pradesh, and Andhra Pradesh could, however, improve the situation in the years to come.

The Case for a National Gold Policy

SBI’s economists argue that India’s gold-related policies since the late 1970s have largely aimed to curb physical demand rather than create a sustainable gold ecosystem. In contrast, China has developed a national framework that strategically regulates how gold is produced, traded, and integrated into its economy.

The report stresses that India now needs to move beyond piecemeal measures and define what gold truly represents—commodity, currency, or both. A comprehensive policy, it suggests, should support localisation, promote recycling, and explore innovative instruments such as gold-backed pension plans aligned with broader financial reforms.

Economic Ripple Effects

The study also highlights the close correlation between gold prices and the Indian rupee’s exchange rate, calculated at a strong 0.73. This indicates that rising gold prices often coincide with rupee depreciation, though the impact is cushioned by import volumes and other macroeconomic factors.

Meanwhile, policy tools like Sovereign Gold Bonds (SGBs) designed to reduce physical imports have driven up government liabilities. The report estimates capital losses on outstanding SGBs at nearly ₹93,000 crore. At the same time, investor enthusiasm for gold exchange-traded funds (ETFs) has soared—assets under management jumped 165% year-on-year to ₹901 billion as of September 2025.

A Global Perspective

Globally, major economies continue to treat gold as a pillar of financial security. The United States and Germany, for instance, hold over three-quarters of their reserves in gold. India’s central bank has also been steadily increasing its holdings: gold now accounts for 15.2% of the Reserve Bank of India’s reserves, up from 13.8% in FY25 and 9.1% in FY24.

While most of this increase reflects revaluation gains rather than new purchases—the RBI added just 0.6 tonnes in FY26—the focus on domestic storage and risk diversification marks a notable shift in strategy.

The Way Forward

The SBI study closes with a firm recommendation: India must move towards a long-term, coordinated gold policy that aligns consumer behavior, financial innovation, and macroeconomic stability. This would mean encouraging gold monetisation, boosting domestic mining, and reducing reliance on imports—steps that could convert the country’s deep-rooted love for gold into a tool for economic fortification.

In an era when gold glitters brighter with every geopolitical storm, India stands at a golden crossroads—one that demands vision, policy clarity, and strategic foresight to turn cultural affinity into financial strength.