New Delhi, Oct 10 (NationPress) The wealth held by Indian households in gold is estimated at 34,600 tonnes, valued at approximately $3.8 trillion, which represents 88.8% of GDP. This situation is generating a favorable wealth effect for household balance sheets, especially as gold prices reach new heights, according to a report from Morgan Stanley published on Friday.

Currently, gold prices are at record highs, trading around $4,056 per ounce, with domestic prices also hitting unprecedented levels at about Rs 127,300 per 10 grams. Year-to-date, gold prices have increased by 54.6% in USD and 61.8% in INR, the report indicates.

Households' shift towards financial assets has led to a rise in gold investments through ETFs, with flows reaching US$1.8 billion over the past year. This trend is anticipated to persist, as noted in the report.

India stands as the world’s second-largest gold consumer, making up roughly 26% of global demand, just trailing behind China, which accounts for 28%.

While traditionally, household consumption drives this demand, there has been a significant uptick in central bank purchases. The Reserve Bank of India (RBI) has increased its gold reserves by around 75 tonnes since 2024, totaling 880 tonnes, which represents about 14% of India’s total foreign exchange reserves, according to the report.

Gold consumption in value has surged to $68 billion on a trailing four-quarter basis as of June 2025, based on WGC data, while the volume remains stable at approximately 767 tonnes, which is considerably lower than the peak of 1,145 tonnes recorded in June 2011.

The steady inflation rate—averaging 5% year-on-year since the introduction of the flexible inflation targeting framework in 2016—combined with positive real interest rates (averaging 1.7% since post-pandemic policy normalization), has kept gold imports within a range of 1-1.5% of GDP.

This rate is significantly reduced from the all-time high of 3.3% of GDP recorded in May 2013. Healthy macroeconomic stability has prevented households from excessively favoring savings in physical assets, consequently limiting gold imports and easing pressure on the current account deficit, the report concludes.