To place that in perspective, Pakistan’s total financial system is price round $411 billion, in accordance with IMF estimates for FY25. This implies India’s non-public gold holdings are practically six occasions bigger than Pakistan’s GDP. Actually, the worth of gold held by Indian households is larger than the GDP of developed international locations like Italy ($2.4 trillion) and Canada ($2.33 trillion).
In line with UBS, gold costs have doubled since FY20, considerably boosting Indian family wealth. The financial institution forecasts costs to rise additional to $3,500 per ounce by 2026, pushed by international uncertainties corresponding to commerce tensions, inflation, and geopolitical dangers. Whereas UBS expects gold quantity demand in India to melt in FY26, excessive costs will maintain internet imports elevated at $55–60 billion, or about 1.2% of GDP.
Regardless of document costs, gold demand in India held up properly in FY25, with shopper demand at 782 tonnes—15% above the pre-pandemic common. Jewelry demand softened barely, however retail funding in gold bars and cash jumped 25% YoY, supported by a lower in customs responsibility from 15% to six% in mid-2024.
Trying forward, UBS tasks gold demand to reasonable to 725 tonnes in FY26, earlier than recovering to 800 tonnes in FY27 as family consumption stabilises. A key issue behind this restoration might be a $55 billion pay increase anticipated from the eighth Central Pay Fee, which tends to extend bodily financial savings—notably in actual property and gold.
Whereas India’s gold reserves are spectacular, efforts to monetise this wealth have largely fallen quick. UBS notes that lower than 2% of family gold is used as collateral for loans, regardless of makes an attempt by banks and NBFCs to broaden on this section. Bajaj Finance, Shriram Finance, and Chola are among the many monetary companies growing their publicity to gold-backed lending. Nevertheless, structural obstacles—corresponding to emotional attachment to gold jewelry—have restricted the success of initiatives just like the Gold Monetization Scheme (GMS) and Sovereign Gold Bonds (SGBs). UBS additionally factors out that SGBs have been discontinued in February 2024, partly as a result of rising gold costs and rising liabilities for the federal government.That stated, India’s present account deficit stays manageable, regardless of the heavy import burden of gold. UBS attributes this to buffers constructed post-pandemic, together with a robust providers commerce surplus and sturdy remittance flows, which assist offset gold-related outflows.Additionally Learn: IT shares up 35% in lower than 2 months. Can it face up to Fed warning and geopolitical threat?With 14% of the world’s non-public gold inventory, India continues to be the most important non-public holder of gold globally. As UBS places it, Indian households usually are not simply sentimentally connected to gold—they’re rising wealthier due to it. And in a world of uncertainty, India’s age-old belief in gold appears to be paying off.
