Summary of this article
Gold volatility exposes gaps in India’s policy framework
Import dependence drives call for localisation strategy
Central bank buying reinforces gold’s strategic importance
SBI Research flags need for comprehensive long-term gold policy
Gold has taken centre stage in global markets, drawing the attention of households, investors, central banks and traders amid rising uncertainty. Price swings, record highs and steady accumulation by central banks underline gold’s role as both an investment asset and a risk hedge.
Against this backdrop, SBI Research flags the need to rethink India’s approach to the metal, noting that “Cherished by households, cheered by investors, hoarded by central banks and feted by speculators, the recent chequered journey of the shiny metal has been straight out of a story book, but also cautions as a fear gauge of the tempest waiting on the sidelines.... Time for India to have a dedicated long-term Gold policy that supports localisation,” says the SBI Research Report titled,” Coming Of (A Turbulent) Age: The Great Global Gold Rush.”
Going by SBI Research, India remains one of the largest markets for gold, driven by cultural affinity, investment demand, its role as a hedge against inflation and a safe haven asset. Total consumer demand for gold in India rose to 802.8 tonnes in 2024, accounting for 26 per cent of global gold demand and placing India second only to China. According to SBI Research, higher prices have, however, begun to weigh on demand, with Q3 2025 consumer demand declining by around 16 per cent year-on-year, led by a sharp 31 per cent fall in jewellery demand.
Gold price has been reaching new heights driven by geopolitical tensions, economic uncertainty, and a weakening US dollar. The year-to-date price has increased by over 50 per cent in 2025. The price came down to below $4000/oz for a few days in October, but again moved above $4000/oz in November.
According to SBI Research, India’s dependence on imports remains a key vulnerability. Domestic supply is only a fraction of total availability, with imports contributing around 86 per cent of supply in 2024. While gold imports rose sharply in FY24 and FY25, higher prices reduced imports by 9 per cent to $26.5 billion in FY26 April- September. Going by SBI Research, this trend has implications for the current account, though the impact is expected to remain manageable even after gold touched record highs in October 2025.
Central banks, too, have played a role in the global gold rush. According to SBI Research, the RBI’s gold reserves rose to around 880 tonnes in 2025 as part of strategic reserve management. At the same time, policy tools such as Sovereign Gold Bonds, aimed at reducing physical gold demand, have added to government liabilities, with capital losses on outstanding units estimated at Rs 93,284 crore, assuming current redemption prices.
SBI Research also flags the need to rethink how gold is viewed. “The perceptions on gold in economic thoughts in East and West bear a striking difference,” the report notes, adding that in Asia, gold continues to be seen as private property and a material asset. It further observes that “The present treatment of gold under national income, balance of payment and its links to CAC all need careful harmonisation.”
Going by SBI Research, recent discoveries of gold mines in Odisha, Madhya Pradesh and Andhra Pradesh offer a potential pathway to ease import dependence and strengthen state finances through ad-valorem royalties. “The time has now come to conceive a comprehensive policy on gold,” the report says, underlining the case for a long-term, localisation-focused approach that aligns gold with broader financial sector reforms.
