Gold has served as a symbol of security and prosperity in Indian households for centuries, far beyond just being an ornament. However, mean and use of gold have transformed over the years for Indians. Investing in gold by Indians is evolving. While overall gold investments are on the rise, the appeal of traditional physical gold, especially jewellery, is diminishing.
Instead, financial gold—like gold ETFs—is gaining momentum.
As per the data from the World Gold Council, India’s demand for gold jewellery has dropped for 3 consecutive years. From 610 tonnes in 2021, it decreased to 600 tonnes in 2022, further declined to 575 tonnes in 2023, and is projected to fall to 563 tonnes in 2024, reflecting a 7% drop compared to 2022. The primary cause of this trend is the sharp rise in gold prices.
In 2024, gold prices in India surged by over 15%, making jewellery purchases more expensive. Furthermore, making charges, which add an additional 10-25% to the cost, are discouraging potential buyers.
Demand for gold bars and coins has remained relatively stable, though it has not kept pace with the growth of financial gold products. The demand dropped from 186 tonnes in 2021 to 173 tonnes in 2022 but rebounded to 185 tonnes in 2023 and surged to 239 tonnes in 2024, a 29% increase.
Experts suggest that this surge is a short-term reaction to geopolitical tensions and rising gold prices. In the long term, however, bars and coins are losing favour to financial gold, which offers greater convenience.
The most notable shift is towards paper gold. Gold Exchange-Traded Funds (ETFs), which track the price of gold without requiring physical ownership, have gained significant popularity.
According to AMFI data, net inflows into gold ETFs rose from ₹460 crore in 2022 to ₹2,919 crore in 2023 and then skyrocketed by 216% to ₹9,225 crore in 2024.
Several factors contribute to this surge. Gold ETFs are easier to buy and sell compared to physical gold, with no making charges or storage concerns. They also offer high liquidity, allowing investors to trade on stock exchanges at any time. This convenience is particularly attractive to urban and younger investors.
The 2024 Union Budget has further accelerated the shift toward financial gold. Previously, long-term capital gains (LTCG) on gold ETFs were taxed at 20% with indexation if held for over three years. Now, gold ETFs qualify as long-term assets if held for just 12 months and are taxed at a flat 12.5%, without indexation.
In comparison, physical gold, including jewellery, bars, and coins, still requires a 24-month holding period to qualify for LTCG benefits, making financial gold a more tax-efficient option.
Several factors are pushing Indians towards financial gold:
Although physical gold remains culturally significant, particularly for weddings and festivals, India’s gold market is gradually shifting toward financialisation. Experts believe that while jewellery will always hold cultural importance, the future of gold investment in India is increasingly centred around paper gold.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.
Investments in securities market are subject to market risks, read all the related documents carefully before investing.
Published on: Feb 19, 2025, 11:27 AM IST
Sachin Gupta
Sachin Gupta is a Content Writer with 6+ years of experience in the stock market, including global markets like the US, Canada, and Australia. At Angel One, Sachin specialises in creating financial content that simplifies complex market trends. Sachin holds a Master's in Commerce, specialising in Economics.
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