The power of the golden egg
According to Hindu mythology, the universe was born from a golden egg, shining like the sun. Thus, gold radiates all aspects of Indian life, especially weddings, where the bride receives the “stridhan”: a quantity of gold that is hers forever, even in the event of divorce.
At a time when the price of gold is skyrocketing, what a blessing for the Indian nation! With gold up 75% over the past year[1] , it shines brightly on the value of the Indian central bank’s reserves – around 880 tonnes of gold, placing India ninth in the world. Above all, it highlights the wealth of Indian households, which hold more gold than the ten largest central banks combined! A recent study by Morgan Stanley estimates that Indian households hold up to 34,000 tonnes of the precious metal, although the most common estimate is around 25,000 tonnes[2] .
Gold represents a significant portion of Indian families’ wealth, generally more than 10% and sometimes up to 50% in the least banked social categories. As a result, the wealth effect of gold’s appreciation on the population is considerable. In theory, consumption should benefit greatly in a country where it accounts for around 70% of GDP. A lever for a new golden age?
In reality, the effect is not so direct. There is a considerable gap between the theoretical wealth effect and actual spending. On the one hand, many households view gold as insurance, a status symbol or an asset to be passed on, rather than as capital to be spent. On the other hand, high gold prices lead to at least two economic difficulties: a rebound in inflation when it comes to buying jewellery – a traditional practice in India – and an increase in the trade deficit, since almost all gold is imported. This deficit puts downward pressure on the rupee, which can affect inflation for other imported goods. The link between gold wealth and Indian consumption is therefore not obvious.
However, one positive effect is already apparent: gold-backed loans offered to individuals by banks and non-financial institutions are booming. According to the Reserve Bank of India, in November 2025, the amount of such loans had doubled over the previous six months. This renewed source of credit at competitive rates, which does not involve any additional gold imports, can only boost consumption, while allowing households to avoid permanently parting with their precious assets.
Furthermore, beyond this effect on credit, and despite its consequences on the trade deficit, the explosion of Indian wealth thanks to the price of gold has another virtue, this time of a geopolitical nature. The country’s gold reserves can only strengthe ly the country’s status in its quest for independence from the dollar. At a time when the nation is facing punitive tariffs imposed by the United States, and at the same time signing a huge trade agreement with Europe, India can use the unexpected help of the precious metal to assert its sovereignty. This confirms that its power has, since its inception, been consubstantial with the “Hiranyagarbha”, the primordial golden egg.
Alexis Bienvenu, Manager, La Financière de l’Échiquier (LFDE)
Written on 30 January 2026
Disclaimers: These data and opinions are provided for informational purposes only and do not constitute an offer to buy or sell a security, investment advice or financial analysis. Past performance is not indicative of future results.
[1] Over a rolling year ending 30 January 2026, in dollars
[2] By comparison, the world’s largest central banks each hold only 2,000 to 3,000 tonnes, with the record held by the US Federal Reserve, which sits on 8,000 tonnes.