India’s Hidden Gold Hoard Hits Record Value of $3.8 Trillion After Rallying 62% in 2025: Morgan Stanley

Indian household wealth in gold has exploded to an estimated $3.8 trillion, following a spectacular 62% rally by 2025, pushing the value of the country’s private gold to nearly 89% of GDP. This is a stunning testament to the metal’s enduring grip on household balance sheets and its growing role as a store of wealth amid global uncertainty.

The increase has produced a powerful wealth effect for households that traditionally invested in physical assets, even as consumption volumes remained stable. With gold prices hitting record highs above $4,000 an ounce globally this week and standing at about ₹1.27 lakh per 10 grams domestically, Indian households are quietly sitting on one of the world’s largest private treasures of the precious metal – worth more than three times their shareholding.

Morgan Stanley estimates that Indian households will collectively own about 34,600 tonnes of gold by June 2025, making the country the world’s second largest consumer after China. According to the report, Indian households’ gold holdings at current market value are about 3.1 times the current equity holdings of $1,185 billion.

While India’s annual gold consumption has largely been between 750 and 840 tonnes since 2021, significantly down from the peak of 1,145 tonnes in June 2011, the sharp acceleration in domestic gold prices has pushed consumption to new record levels in value terms. According to Morgan Stanley, gold consumption shot up to $68 billion on a four-quarter basis in June 2025, up from $44 billion in June 2023. The previous peak of $55 billion was reached in June 2013, driven by strong volume trends of 1,067 tonnes.

On a year-on-year basis, global gold prices have risen by 54.6%, while domestic prices have risen by around 62%, partly due to the depreciation of the rupee. The rupee has weakened by 3.8% this year, pushing up domestic prices and rupee-denominated yields further.

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India accounts for 26% of global gold demand

According to the World Gold Council, as of June 2025, India will account for about 26% of global gold demand on a four-quarter basis, versus a five-year average of 23%, behind China with a share of about 28%. While jewelery makes up the bulk of gold demand in India, with a share of two-thirds, the share of retail investment instruments such as bars and coins has risen over the past five years from 23.9% in June 2020 to 32% in June 2025.

Because India’s domestic gold production is negligible at around 2% of total demand – the Hutti gold mine in Karnataka is the country’s main operating gold mine – the country is heavily dependent on imports from countries such as Switzerland, the United Arab Emirates and South Africa, making it the second largest importer of gold after China.

Demand for safe havens amid global unrest

Previous episodes indicate a similar rise in prices during times of distress or crisis, such as the global financial crisis in 2008 and the Covid-19 pandemic in 2020, led by an exponential increase in demand for the safe haven. Globally, increased geopolitical tensions resulting from the US government shutdown and the political crisis in France have contributed to volatility in global financial markets. Continued interest rate easing by the Fed, which is expected to continue in the coming months, along with a weakening dollar, has given new impetus to the rise in gold prices.

A key structural driver is gold’s increasing relevance as a reserve asset, encouraging central bank purchases amid ongoing global uncertainty. The amount of gold held by central banks worldwide has almost doubled in the past decade. India in particular has steadily increased its gold reserves to 14% in September 2025, up from 8.1% in September 2023.

Gold vs Stocks

Despite gold’s wealth impact, Morgan Stanley notes that lower inflation combined with positive real interest rates has kept demand for gold subdued, with household savings preferences shifting in favor of financial assets. Within household financial savings, the share of deposits has fallen to 35% in FY 2025, down from 40% in FY 2024 and 46% before the pandemic, while shares have risen to a record high of 15.1% in FY 2025, down from 8.7% in FY 2024 and around 4% before the pandemic.

Morgan Stanley strategist Ridham Desai expects these trends to continue, with the share of equities on household balance sheets accelerating further, led by favorable demographics, increasing investor education, a low starting point of domestic equity ownership, policy change allowing pension funds to buy equities since 2015, and an improved regulatory environment. Desai expects the ratio of stock values ​​to gold holdings to likely exceed one in the coming years, up from just 0.3 currently.

“As the trends of financialization and formalization of the economy become more entrenched, the diversification of household savings into market-related products is gaining importance, especially among retail investors,” the Morgan Stanley report said.

The bank believes the trend towards financial assets will continue as policymakers focus on maintaining macro stability. At the same time, the stock of gold provides a positive wealth effect on household balance sheets, which also benefits from cyclical factors such as lower interest payments when monetary policy is eased, and the positive impact on disposable income through direct and indirect tax cuts.