India’s Hidden Gold Reserves Soar to $3.8 Trillion After 62% Surge

India’s household gold wealth has skyrocketed to an estimated $3.8 trillion, driven by a remarkable 62% surge in 2025. This increase has lifted the value of privately held gold to nearly 89% of the nation’s GDP, highlighting the metal’s robust presence in household finances and its growing significance as a wealth reserve amid global instability.

The rise in gold prices has created a substantial wealth effect for families that traditionally invest in physical assets, even as consumption levels remain steady. With global gold prices reaching record highs above $4,000 per ounce and domestic prices around ₹1.27 lakh per 10 grams, Indian households now boast one of the world’s largest private collections of gold—worth over three times their stock market investments.

According to Morgan Stanley’s estimates, Indian households held approximately 34,600 tonnes of gold as of June 2025, positioning the country as the world’s second-largest consumer after China. The market value of Indian households’ gold holdings stands at about 3.1 times their current equity stock investment of $1,185 billion.

While India’s yearly gold consumption has mostly remained steady between 750-840 tonnes since 2021—significantly lower than the peak of 1,145 tonnes in June 2011—the sharp increase in domestic gold prices has driven the consumption value to record levels. Gold purchases surged to $68 billion on a trailing four-quarter basis by June 2025, up from $44 billion in June 2023, according to Morgan Stanley. The previous peak of $55 billion was recorded in June 2013, influenced by strong volume trends of 1,067 tonnes.

On a year-to-date basis, global gold prices have increased by 54.6%, while domestic prices have advanced by about 62%. This surge is partly attributed to the depreciation of the rupee, which has weakened by 3.8% this year, further enhancing domestic gold prices and returns measured in rupee terms.

India accounts for 26% of global gold demand as of June 2025, according to the World Gold Council. This is an increase from a five-year average of 23%, putting India just behind China, which represents about 28% of global demand. Jewelry forms the largest portion of gold demand in India, holding a two-thirds share, but retail investment in bars and coins has also risen significantly, climbing from 23.9% in June 2020 to 32% in June 2025.

Since domestic gold production is minimal—approximately 2% of total demand, with Hutti Gold Mine in Karnataka being the nation’s primary operational mine—India relies heavily on imports from countries like Switzerland, the UAE, and South Africa, making it the second-largest gold importer after China.

Historically, gold prices tend to soar in times of crisis, such as during the global financial storm in 2008 and the COVID-19 pandemic in 2020, fueled by increased demand for this safe-haven asset. Present global tensions, including the U.S. government shutdown and political unrest in France, have also contributed to market volatility. The Federal Reserve’s ongoing rate cuts, anticipated to continue in the coming months, along with a declining dollar, have acted as key catalysts for rising gold prices.

A vital structural factor in this trend has been the growing acknowledgment of gold as a reserve asset. This shift has driven significant central bank purchasing amid ongoing global uncertainty, with total central bank gold holdings nearly doubling in the past decade. In India, the gold reserves owned by the central bank increased to 14% by September 2025, up from 8.1% in September 2023.

Despite the favorable wealth effects from rising gold values, Morgan Stanley notes that lower inflation and positive real interest rates have kept gold demand relatively stable. There is a noticeable shift toward financial assets among households, with the share of deposits declining from 40% in fiscal 2024 to 35% in fiscal 2025, while equities have climbed to a record 15.1%, up from 8.7% the previous year.

Morgan Stanley strategist Ridham Desai anticipates that these trends will persist, projecting that the ratio of equity value to gold holdings will surpass one in the coming years, a sharp increase from the current 0.3. “As financialization and formalization of the economy solidify, the diversification of household savings towards market-linked products is becoming increasingly important, especially among retail investors,” the report highlights.

The bank expects that the trend towards financial assets will remain strong, as policymakers focus on maintaining macroeconomic stability. At the same time, the robust gold stock continues to positively influence household balance sheets, which are also being boosted by lower interest payments due to eased monetary policy, as well as favorable effects from tax reductions on disposable income.

What are your thoughts on the investment potential of gold in today’s economic landscape?