Gold has been at the center of many discussions. The sharp rise, the volatile spikes and the value plummeting 22% from highs has kept investors on tenterhook. It has fallen to its lowest level in 2026 but the yellow metal continues to charm investors and for most Indian household, it is seen as both savings and security. But is it really making India richer?
Given the huge price action over the last few years, this silent surge in wealth has sparked a deeper debate. Kotak Institutional Equities pointed to what it calls a ‘Midas’ touch for India. But is this rise in gold value as positive as it looks on the surface?
Let’s take a look –
#1 Household wealth has surged sharply
One of the key factors to be noted is the striking number. According to the brokerage report, “the value of the stock of gold with Indian households stands at a whopping $5 trillion (125% of Gross Domestic Product).”
This value has risen sharply in recent months due to higher gold prices. The report also added that “the value of stock of gold with households is now a sizable 65% of the non-property stock of wealth with Indian households.”
This indicates that gold is not just a traditional asset, it forms a large chunk of household wealth in India.
#2 Creates a sense of higher wealth but impact is limited
At first instance, rising gold value appears positive. According to the brokerage report, “the steep increase in the value of stock of gold with Indian households on the back of a sharp increase in prices of gold should theoretically hold several positives for India – (1) higher household wealth, (2) stronger household sentiment and (3) potential higher spending.”
However, this impact may not be very strong in reality. The report pointed out that despite higher gold prices, spending patterns do not change significantly.
#3 No clear link with consumption
A key finding is that higher gold value does not automatically lead to higher spending. According to the brokerage report, “we would assume a moderate positive impact of the sharp increase in the wealth of households on domestic consumption even though there has been no correlation historically between (1) gold prices and (2) domestic consumption.”
This is because gold is held across income groups, especially by lower-income households. These households may not increase spending just because the value of their gold has gone up.
#4 Gold is not easily used for economic activity
Gold serves multiple purposes in India such as savings, wealth, and jewellery. But this also limits its role in the economy.
As per the brokerage report, “the nature of gold and its triple role of (1) store of value, (2) store of wealth (unaccounted for also) and (3) jewelry for Indian households severely restricts its usage as a productive asset.”
The report explained that loans against gold are one way to use it productively. However, even here the scale is small compared to overall lending by banks and Non-Banking Financial Companies (NBFCs).
#5: Can create pressure on the broader economy
One of the less visible effects of rising gold demand is on financial savings. When households buy gold, they move money away from bank deposits and financial instruments.
According to the brokerage report, “households’ gold purchases represent a conversion of financial savings (bank deposits) into physical assets. This is tantamount to exports of household capital.”
This shift can affect liquidity in the system and may even impact the Reserve Bank of India (RBI), which is the country’s central bank. It can limit money supply growth unless supported by policy action.
The report also highlighted the scale of imports, noting that “net gold and precious stone imports at $500 billion dwarf Foreign Portfolio Investor (FPI) debt and equity net flows of $200 billion and almost match FPI and Foreign Direct Investment (FDI) flows of $600 billion.”
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor.