The love affair between Indians and gold is the stuff of legends. 

In 2019, the World Gold Council (WGC) estimated estimated Financial Express In gold we trust: India’s household gold reserves valued at over 40% of GDP Read more  that Indian households had stocked up to 25,000 tonnes of gold, making the country the largest holder of the yellow metal in the world. For perspective, the value of this gold at $1.1 trillion then was equivalent to more than 40% of India’s gross domestic product (GDP). 

Both the volume and the value of this hoard have only gone up since. Indians made up for the dip in imports and demand in 2020 the following year, shows WGC data. Gold prices, too, shot up during the pandemic; it rose from about Rs 32,000 ($410) per 10 grams in May 2019 to a peak of Rs 56,000 ($720) in August 2020. Currently, it’s trading close to Rs 50,000 ($645)

For many during the pandemic, the metal was a lifeline, pledged as it was for loans. Even the country’s central bank, the Reserve Bank of India, upped upped The Indian Express As FPI exits hit forex reserves, RBI stepped up gold purchases Read more  its gold holdings, adding 16.58 tonnes to hit over 760 tonnes in the six months ended March 2022.  

While the enduring engagement between Indians and gold continues, the equation between the two has been changing. Because, the pot of gold that India’s sitting on may well turn out to be the leprechaun’s.

India is the world’s second-largest consumer of gold after China, but it also imports most of its requirements. With the price of the rupee steadily depreciating—Rs 77.64 for $1 at the time of writing—it sticks India with a rather large forex bill. 

Not surprisingly, successive governments have been trying to wean Indians away from physical gold. 

In 2013, P Chidambaram, India’s then finance minister, appealed appealed The Times of India Don't buy gold, P Chidambaram urges citizens Read more  to citizens to curb their appetite for gold, and raised import duties. And in 2015, a year after a new government was sworn in, India introduced sovereign gold bonds (SGBs)—paper gold dangled as an investment option, with a nominal interest rate thrown in as a sweetener.