India’s Gold Financialisation Is Changing Ownership More Than Demand

India’s relationship with gold has followed a familiar pattern for generations. Families bought jewellery during weddings and festivals, households stored coins and bars as savings, and in periods of uncertainty, gold functioned as a fallback asset that people trusted.

That relationship is still very much there, but is also witnessing changes rapidly.

The change becomes visible once datasets that are usually discussed separately — such as Sovereign Gold Bond mobilisation, gold ETF growth, World Gold Council demand trends and India’s physical gold import bill — are collectively examined.

Together, they show two things happening simultaneously. First, formal financial channels for gold ownership have expanded sharply over the past five years. Secondly, India’s broader dependence on gold remains substantial.

However, data suggests that the transition has been complicated.

The clearest evidence comes from Sovereign Gold Bonds. Launched in 2015, the scheme allowed investors to gain exposure to gold prices without purchasing physical gold. Instead of holding jewellery, coins or bars, investors could buy government-backed securities linked to gold prices.

According to RBI annual reports, SGB mobilisation stood at just ₹5.88 billion in 2018-19, equivalent to 1.84 tonnes of gold at that point in time. But then it changed sharply over the years.

Mobilisation rose to ₹23.16 billion in 2019-20. In 2020-21, the first full pandemic year, the amount raised jumped to ₹160.49 billion. The year 2021-22 saw another ₹129.91 billion mobilised through the scheme. The figure fell to ₹65.51 billion in 2022-23 before climbing again to ₹270.31 billion in 2023-24, the highest level, in the dataset reviewed for this article.

To be sure, no major fresh SGB issuances were announced in 2024-25 as the government reassessed the scheme amid rising gold prices and growing repayment liabilities.

The rise was not driven by prices alone. RBI data also shows the gold-equivalent quantity mobilised through the scheme increased sharply over the same period, from 1.84 tonnes in 2018-19 to 44.34 tonnes in 2023-24. That suggests participation in financial gold products expanded materially in physical terms as well, not just in rupee value.

Rising gold prices also increased the attractiveness of financial gold products by generating strong gains for existing investors over time.

Gold exchange traded funds, or Gold ETFs, also expanded rapidly during this period.

Trends captured by the Association of Mutual Funds in India and the World Gold Council suggest that gold ETF inflows and assets under management reached record levels in recent years as investors increased allocations to gold amid global uncertainty, rising prices and volatile financial markets.

The growth of these products does not necessarily mean Indian households are abandoning physical gold. Rather, the growth of ETFs suggests gold investment increasingly moved through formal market-linked channels alongside traditional forms of ownership.

At first glance, the rise of financial gold products might appear likely to reduce pressure on physical gold imports over time. The broader import trend, however, remained substantial.

Commerce ministry trade data shows India’s gold import bill stood at roughly $32.9 billion in 2018-19. It then moved through a volatile but broadly rising trajectory.

In 2019-20, it was around $28.2 billion, in 2020-21 it was $34.6 billion and in 2021-22 it was $46.2 billion. In 2022-23, it dropped to around $35 billion. But, since then, it has only gone up – and has more than doubled in three years.

Source: Commerce ministry trade data for commodities (HS code 7108), DGCI&S analytical paper

After dipping during the pandemic-disrupted 2019-20, the import bill climbed sharply in 2021-22, moderated in 2022-23 and then rose again to record levels over the following years.

A larger import bill does not automatically mean India imported proportionately more gold in physical terms. Rising global gold prices also inflated the value of bullion imports during this period.

Recent trade data illustrates that distinction clearly. India’s gold import quantity rose from 678.3 tonnes in 2022-23 to 795.2 tonnes in 2023-24 before falling to 669.3 tonnes in 2024-25 even as the import bill continued climbing sharply. The divergence suggests a significant part of the recent increase in import values came from higher global gold prices rather than rising physical volumes alone.

World Gold Council demand data points to a similar conclusion: India’s underlying appetite for gold remained strong even as financial participation expanded. Its datasets show jewellery demand continuing to occupy a large share of overall gold consumption, while investment demand also strengthened in recent years.

Source: World Gold Council Historical demand and supply

This explains why financialisation has not automatically translated into a visibly smaller import bill. The data increasingly points toward expansion rather than replacement.

Formal financial products appear to be widening participation in gold ownership without fully displacing traditional demand for jewellery and physical gold.

India imports most of the gold it consumes. Large gold imports affect the trade balance because the country spends foreign exchange to purchase bullion from overseas markets. During periods when oil prices are also elevated, gold imports can add pressure to India’s current account deficit and external balances.

That is one reason why policymakers encouraged products like SGBs. The idea was not merely to create another retail investment product. They also offered a way to bring household savings into formal financial channels while potentially reducing dependence on imported physical gold over time.

The RBI’s 2018-19 annual report said the SGB scheme aimed to “broaden the investment choice for investors as well as to widen the retail investor base.” The data suggests financial gold products expanded rapidly over the past five years, even if some parts of that ecosystem are now evolving. But what remains less clear is how far that expansion changed the broader structure of India’s gold demand. The sharp acceleration after 2019-20 did not happen in isolation. The pandemic years - and the years after - altered household attitudes toward risk, savings and financial markets globally. 

Interest rates collapsed, inflation concerns rose, equity markets became volatile, and geopolitical uncertainty intensified after the Russia-Ukraine war and subsequent tensions in West Asia.

Gold benefited from that environment internationally, and India’s financial gold products appear to have benefited as well. Hence we can see SGB mobilisation surge during 2020-21 and 2021-22. On one hand, gold ETF inflows strengthened. On the other hand, investing in gold through financial platforms also became easier as digital investment channels expanded rapidly after the pandemic.

The data does not suggest India moved away from gold. It rather suggests Indians gained more ways to own it.

The trend complicates a simplistic reading of financialisation. The numbers do not show a straightforward transition from physical gold to financial gold. Instead, traditional and financial forms of gold ownership now appear to be expanding alongside each other rather than replacing one another.

Some of the explanation may lie in the structure of the products themselves.

SGBs provide paper exposure to gold prices without requiring investors to hold physical bullion directly. Gold ETFs, however, are typically backed by underlying bullion holdings somewhere within the system. That means not all forms of financialisation reduce physical gold demand in the same way. 

SGBs were designed to provide gold exposure without requiring investors to purchase physical bullion directly. However, fresh issuances slowed sharply after 2023-24 as rising gold prices increased the government’s future repayment liabilities under the scheme.

Meanwhile, jewellery demand remains deeply embedded in household consumption patterns and social practices across large parts of the country. The result is a gold market that appears to be expanding across multiple channels simultaneously.

India’s relationship with gold has always carried significance beyond jewellery demand alone. Gold imports influence external balances, household gold ownership shapes savings patterns, and policymakers have repeatedly tried to shift at least part of that ownership into formal financial channels.

The data reviewed for this article suggests India’s financial gold ecosystem is now operating at a far larger scale than it did even a few years ago. But the persistence of strong jewellery demand, elevated imports and rising investment participation suggests traditional and financial forms of gold ownership appear to be coexisting at scale rather than replacing one another.

India’s gold financialisation story may, therefore, be changing the structure of ownership faster than it is changing the structure of demand itself, even as the policy mechanisms supporting that transition continue to evolve.