Recently, Morgan Stanley focused on the robust India Economics and published their report; Ecoview: Gold – All that Glitters! They reported, India’s households’ wealth held in gold is estimated at US$ 3.8tn / 88.8% of GDP. This is providing a positive wealth effect, even as benign macro stability ensures that flow of gold demand remains range bound.
With gold prices scaling new highs, “we take stock of trends in gold demand, stock of gold holdings with households, and the impact on macro stability” said Morgan Stanley by listing,
1: Gold prices are currently at all-time highs, trading around US$4056/oz, with domestic prices also reaching record levels of ~Rs127,300/10 gms. YTD, gold prices have risen by 54.6% in USD terms and 61.8% in INR terms.
2: India remains the world’s second-largest consumer of gold, accounting for about 26% of global demand, just behind China at 28%. Traditionally, household consumption represents the bulk of this demand, but there has
been a notable increase in central bank purchases at the margin. The Reserve Bank of India (RBI) has added approximately ~75 tonnes to its gold reserves since 2024, bringing its total holdings to 880 tonnes, which now constitute about 14% of India’s total foreign exchange reserves.
3: While gold consumption in value terms has risen to US$ 68bn on a 4q trailing basis as of Jun-25 as per WGC data, in volume terms it remains steady at ~767 tonnes, far below the peak of 1145 tonnes in QE Jun-11.
4: A benign inflation trend—averaging 5% YoY since the adoption of the flexible inflation targeting framework in 2016—combined with positive real interest rates (averaging 1.7% since policy normalisation post pandemic), has helped contain gold imports within a range of 1-1.5% of GDP.
This is significantly lower than the all-time high of 3.3% of GDP recorded in May 2013. Sound macroeconomic stability has helped ensure that households do not develop an excessive preference for saving in physical assets, thereby containing gold imports and easing pressure on the current account deficit.
5: Gold provides a buffer in the household balance sheet. In our estimates, household own 34,600 tonnes of gold, or approximately US$3.8tn/88.8% of GDP. This implies a positive wealth effect on the household balance sheet, given the uptrend in gold prices. A preference for financial assets by households has meant that investing in gold through ETFs has picked up recently, with ETF flows tracking at US$1.8bn in the last 12 months.
in the Bottom line, Morgan Stanley said, Lower inflation coupled with positive real rates had kept gold demand
range bound, with incremental household saving preference shifting in favour of financial assets. We believe this trend will be sustained, given that policy makers are focused on maintaining macro stability.
At the same time, the stock of holdings of gold provides a positive wealth effect for the household balance sheet, which is also benefiting from cyclical factors of lower interest payments with monetary policy easing and a positive impact on disposable income through direct and indirect tax cuts.
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