In India, gold is not just a commodity; it is tradition, sentiment, security and status rolled into one. It sparkles in wedding ceremonies, rests silently in lockers and forms the bedrock of generational wealth for millions. It is no exaggeration to say that Indians do not merely buy gold – they preserve it, revere it and pass it down through generations. And now, as gold prices nearly touch a record-breaking Rs 1 Lakh per 10 grams, a question stirs in living rooms and bank vaults across the country: Are Indian families becoming richer? 

The instinctive response might be yes. After all, when an asset appreciates dramatically, shouldn't that surge in value translate into real wealth? But the reality is more nuanced than what fancy numbers suggest. Gold’s recent rally is nothing short of dramatic. In just a few years, its price has nearly doubled, pushing it into uncharted territory. This rise has been fuelled by a combination of global uncertainty, inflation fears, weakening currencies and strong demand. In times of turmoil, gold acts as a financial safe haven. It always has. As economies wobble, investors flock to the metal for stability. Unlike shares, it will never pay a dividend. Unlike bonds, it will not provide a steady, predictable income. Yet, it remains among the most trusted assets in the world. And that’s the thing about gold – it doesn’t promise growth, but it offers safety. In a world where currencies can be devalued overnight and stock markets can crash by morning, gold holds its ground.

In India, this precious metal holds a special emotional and cultural value beyond its market price. Indian households, including temples are estimated to hold over 25,000 tonnes of gold – more than the gold reserves of the US and China combined. According to a March 2024 analysis by The Economic Times, this amounts to over $2.4 trillion in value, nearly six times the size of Pakistan’s entire economy. These are staggering numbers, but they hide an important truth: most of this gold lies dormant, locked away in lockers and vaults rather than circulating productively through the economy.

The typical Indian family owns gold in the form of jewellery: handed down over generations, received during marriages and stored away in lockers. This gold is rarely sold or monetized. It represents security, but not liquidity. While the rise in price does increase the notional or paper wealth of these families, it doesn’t translate into immediate financial benefit. Unless the gold is sold, pledged or invested through formal monetization channels, the increase in its value remains symbolic. In that sense, the average Indian family is wealthier only on paper. The shiny metal resting in the cupboard is now worth more – but it still doesn’t pay the electricity bill, buy groceries or fund a child’s education. And for those who don’t already own gold, the soaring prices are more of a burden than a benefit. The very rise that enriches one section of society shuts another out. 

The emotional reluctance to sell gold further limits its utility as a financial asset. While real estate can be rented, gold mostly sits still. It acts as a reserve, something to be liquidated only in times of need – often medical emergencies, school fees, or unforeseen debts. And even then, many families prefer to take gold loans rather than sell the metal, hoping to reclaim it once their financial situation improves. In response, many families have turned to gold loans – an increasingly popular way to extract value from idle gold. With prices at record highs, the amount one can borrow against a fixed quantity of gold has gone up significantly. This has provided timely relief to many families and small businesses, especially in rural India. But this financial relief comes with a cost – interest. And while it offers short term liquidity, it doesn't change the long-term financial picture.

Moreover, gold ownership in India is not evenly distributed. Urban, middle and upper-middle class families tend to hold more gold, both in quantity and in quality. Rural households, and those in lower income brackets, often own little or no gold. As prices rise, the wealth gap widens. The families who already had gold are now richer; those who couldn’t afford it before are now pushed further away. What was once considered a symbol of shared cultural wealth is fast becoming a luxury good. 

For a country so deeply embedded in the culture of gold, efforts have been made to turn it into a productive asset. The government has introduced initiatives like the Sovereign Gold Bond (SGB) scheme, where individuals can invest in gold digitally and earn interest on their holdings. There is also the Gold Monetization Scheme (GMS), which allows families to deposit idle gold and earn returns. But participation in these schemes remains low as concerns over purity and a general distrust in institutional handling of family jewellery have kept these schemes from gaining widespread traction. 

The rising price has also triggered shifts in how gold is perceived. For many younger Indians, gold is no longer the go-to investment. The share market, mutual funds and even cryptocurrencies have caught their attention. Digital gold has emerged as a middle ground - offering the appeal of the asset without the complications of storage and safety. Yet, the cultural pull of physical gold remains strong, particularly during festivals like Diwali and Akshaya Tritiya, or during the marriage season, when gold continues to flow in tonnes. Despite legal prohibitions on dowry, the expectation that the bride’s family will gift gold remains deeply entrenched. In many communities, gold is not just a gesture of affection but a social obligation, seen as a marker of respectability and status. The rise in gold prices has made fulfilling this expectation increasingly burdensome for middle and lower-income households, sometimes even pushing families into debt to meet ceremonial norms.

Economically speaking, the rise in gold prices does bring both positives and negatives. On one hand, the increased valuation strengthens the balance sheets of families, banks and NBFCs that hold or deal in gold. It boosts exports of jewellery, particularly to markets in the Middle East and the US. On the other hand, it increases India’s import bill: since India imports most of its gold, thus affecting the current account deficit. Skyrocketing prices also temper consumer demand, especially for new purchases, which hurts local jewellers and artisans. 

So, is the rise in gold price a blessing or a bane? It depends. For families who already possess gold and are in a position to use or monetize it, this rise can be a timely boon: providing liquidity during distress. For others, it’s more of a curse in disguise. It adds pressure to traditions, increases the cost of ceremonies and removes gold from their list of affordable assets. More importantly, it highlights a broader truth about Indian personal finance: the need to differentiate between notional wealth and usable wealth. Gold makes people feel secure, and in some ways, that security is its greatest return. But for families to truly get richer, they need to go beyond emotional attachment and start thinking of gold as part of a larger, balanced financial plan. 

So yes, the average Indian family may feel wealthier today. Their lockers are heavier with value than ever before. But whether this translates into better education, more freedom, greater opportunities, or improved lifestyles - that depends not on the price of gold, but on how thoughtfully it is used.

Chehak Jain is an undergraduate student of Delhi University and an intern at Pahle India Foundation.