Why is Gold Becoming a Go-To Investment for Indians?

Gold prices in the international market have posted steady gains through 2025, reinforcing the metal’s status as a preferred investment option for Indians. In February alone, gold exchange-traded funds (ETFs) registered a robust net inflow of ₹19.8 billion. This highlights strong retail and institutional interest despite gold trading at historic highs. The renewed demand for gold highlights its growing appeal among Indian investors. Despite trading at an all-time high, the yellow metal continues to attract interest as a preferred investment option.

Before we explore why gold is becoming a go-to investment for Indians, it is important to understand how investment patterns in gold have evolved.

Various ways Indians are turning to gold investments

For generations, Indians have primarily purchased gold in the form of jewellery. Beyond its cultural significance and aesthetic value, jewellery is considered an easily accessible, storable, and liquid asset. Additionally, a segment of the population has historically invested in physical gold, such as bullion bars and coins, known for their assured and standardised quality.

However, in recent years, investment opportunities in gold have expanded significantly, with various legal and secure alternatives now available. These include:

Sovereign Gold Bonds

These are perfect substitutes for physical gold, offering comparable value, quality, and costs. The Government of India issues these securities in denominations starting at 1 gram (minimum investment). The redemption value tracks physical gold prices 100%. However, considering the present value of physical gold, the minimum investment cost can be substantial for many retail investors.

Gold ETF

Gold ETFs are mutual funds and are liquid assets, as investors can buy and sell them on the exchange, just like any listed stock. These instruments also track physical gold prices. The minimum investment is much smaller than that required for sovereign bonds, and investors can also invest in Systematic Investment Plans (SIPs).

Digital Gold

In collaboration with financial institutions, several privately owned digital platforms allow investments in physical gold in digital formats. The minimum investment threshold is also very small for digital gold, as investors can purchase even a fraction of a gram. When someone buys digital gold, companies purchase an equivalent amount of physical gold and store it in safe vaults. The price of digital gold tracks the physical gold price. Some platforms also allow investors to take delivery in physical form for a pre-specified fee.

Gold Futures

These are commodity derivative products launched and maintained by commodity exchanges such as the National Commodity & Derivatives Exchange NCDEX and Multi Commodity Exchange (MCX). Prices of gold futures vary with trends in physical gold prices and have specific maturity dates. They do not involve taking physical delivery of the metal. At the time of maturity, investors need to square off their positions, or the exchange does so automatically with the close price of the maturity date. The principal purpose of gold futures is to speculate or hedge against the price volatility in physical gold holdings.

Gold Mining Stocks

Investing in gold mining stocks can be an indirect investment in gold. The stock prices of many listed companies engaged in gold mining or with significant holdings of gold are positively correlated with the price of physical gold.

What’s driving the value of gold?

Gold prices have steadily risen since 2022 and have experienced a significant upside in the last couple of months in 2025 LBMA gold price. Most analysts and economists find this trend as strong. This can be attributed to various factors, including supply-demand dynamics, the health of major world economies, and international political developments.

Globally, central banks and institutional investors are the major drivers of the growth in demand for gold. The worldwide demand grew by 1% year-on-year in 2024, pushing total demand to 4,974 tonnes. Technology companies have also been a significant source of demand, with their purchases increasing by around 7% in 2024. For the same period, purchases in the form of gold ETFs rose by 25%. In contrast, the annual supply of physical gold mostly remained relatively stagnant at approximately 3,600 tonnes.

Annual global demand-side data for gold for FY24:

• Total annual gold demand - 4,974 tonnes
  
• Jewellery processing – 2,000 tonnes
  
• Technology usage – 326 tonnes
  
• Investments, including purchases by central banks – 1,179 tonnes
  
• OTC purchases – 420 tonnes
  

In comparison, the total annual demand in 2023 was 4,945 tonnes.

Why is gold becoming a go-to investment for Indians?

Historically, Indians have always had a strong affinity for gold. However, the trend has been increasing lately, driven by several factors:

• Cultural significance of yellow metal

India ranks among the top countries in terms of gold demand for jewellery. Almost every family purchases gold jewellery during marriages and festivities as the metal is considered auspicious.

• Hedge against inflation

The average inflation rate since 2015 has remained steady at around 5% per year. It caused fixed-income assets to lose real value. On the contrary, during the same period, the price of gold increased steadily, serving as a physical storage of value.

• Easier access to paper and digital gold

Public digital infrastructure such as Aadhaar and UPI, along with innovations in scalable technology platforms, has enabled the launch of digital investment instruments for gold. Mutual funds have also launched Gold ETF, making gold investment more accessible and affordable for millions of retail investors in India.

• The downward trend in deposit rate

Investors looking for secure investment returns increasingly choose gold over traditional fixed-income products. Declining deposit rates, unfavourable tax implications on fixed investments, and easier access to secure gold investments are major reasons for this shift.

• Availability of gold loans

It has always been challenging to liquidate gold during emergencies as it often causes distressed sales with unorganised moneylenders demanding high margins. Over the last decade, however, the growing availability of the Reserve Bank of India-regulated gold loans has changed the landscape. As a result, gold has gained significant value as a liquid asset. Today, people no longer need to sell jewellery, bars, or coins to meet financial emergencies as they can borrow against those assets at affordable interest rates. This has further boosted gold’s appeal as an investment among Indians.

Final Takeaways

Cultural affinity towards the yellow metal has always been a major driver of demand for gold as an investment among Indians. However, the metal’s growing status as a highly liquid and steadily appreciating asset is now adding a strong rationale alongside the traditional, emotional, and cultural attachment for Indians.

Sources

World Gold Council
World Gold Council
The Economic Times
The Economic Times
Nippon India Mutual Fund