India and China Lead the World in Gold Demand
Gold remains one of the most trusted and widely used assets in India. Along with China, India stands at the top of the list when it comes to gold consumption. Every year, India uses around 800 tonnes of gold, mostly in the form of jewellery. China’s numbers are slightly higher, but both countries together account for nearly 1,600 to 1,700 tonnes of global gold demand. This is much higher than countries like the US (200 tonnes), Turkey (150 tonnes), and Russia (75 tonnes). Clearly, India and China dominate the global gold market.
Households Prefer Gold Over Equity
One of the most interesting facts is how Indian households allocate their wealth. Around 16% of household wealth in India is held in gold, while only about 5% is in equity. This shows the deep trust Indian families have in gold. For generations, gold has been a symbol of safety and savings. Even people with very low incomes try to save in gold for future events like children’s weddings. This is because gold has given decent returns with lower risk, making it a preferred asset for millions.
Why Gold Demand in India Won’t Decline
Unlike in many countries where only 2–3% of household wealth is in gold, Indians continue to hold a large portion of their assets in gold. This demand is not driven by trends, but by tradition. It is deeply rooted in Indian culture and financial habits. That is why the demand is not going away anytime soon. This kind of steady and emotional connection with gold makes it a permanent part of Indian households.
Gold Imports and the Pressure on the Rupee
However, there is a downside. India does not produce much gold. Most of it has to be imported from other countries. While India exports around $32 billion worth of gold jewellery, it imports about $55 billion worth of gold. This gap puts pressure on India’s current account deficit and affects the value of the rupee. Since gold and oil are the two biggest import items, any rise in their prices can create problems for India’s currency and economy.
Sovereign Gold Bonds and Future Burdens
The government had introduced Sovereign Gold Bonds to reduce physical gold demand. But it may face a problem in the future. These bonds promise returns based on gold’s performance, and if gold prices keep rising, the government will have to pay high returns to investors. This could become a financial burden over the next 7 years as bonds mature.
Final Thoughts on India’s Gold Story
India’s love for gold is strong and unlikely to fade. While this supports families during tough times, it also creates challenges at a national level due to high imports. Understanding these numbers gives a clear picture of how deep gold runs in India’s economic story.
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