Gold occupies a special place in Indian society, which is the second largest consumer of gold in the world. Much more than a precious metal, gold is a symbol of wealth, eternity and prosperity. Gold is omnipresent in Indian culture, history and economy. But what exactly is the place of gold in India today? The metal has spanned the ages and played a central role at every stage of Indian history, while remaining anchored in present-day religious and social practices. This article explores the importance of gold in India from a historical, cultural and economic perspective.

The first historical traces of gold in India 

The history of gold in India dates back more than 3,000 years. Ancient writings such as the Vedas refer to gold as a symbol of purity and immortality. Gold was also the metal on which international trade was based. There is evidence of trade with Mesopotamian, Egyptian and Greek civilisations, where India exported spices, fabrics and precious stones in exchange for gold. 

A striking example of the use of gold in antiquity is the discovery of a gold necklace at Mohenjodaro, one of the main cities of the Indus civilisation (circa 2500 BC). This piece of jewellery, finely worked with gold threads and semi-decorated stones, bears witness to the advanced craft skills and cultural importance of gold from this period onwards. It shows the importance of gold at an advanced period, but not as advanced as in Europe.

Although the first gold coins in India appeared shortly after Croesus, around the 6th century BC, it was not until the Maurya (321-185 BC) and Gupta (320-550 AD) dynasties that gold acquired greater political and economic importance. Sovereigns used gold to mint coins and display their power. These coins, often decorated with images of gods or emperors, were also used as a medium of exchange in domestic and international trade.  

Later, the Muslim invasion from the 11th century and the Mughal domination (1526-1857) also reinforced the role of gold. Mughal emperors such as Akbar and Shah Jahan used the metal to create sumptuous jewellery, royal treasures and historic buildings such as the Taj Mahal.

The place of gold in Indian culture

Although the first gold coins in India appeared shortly after Croesus, around the 6th century BC, it was not until the Maurya (321-185 BC) and Gupta (320-550 AD) dynasties that gold acquired greater political and economic importance. Sovereigns used gold to mint coins and display their power. These coins, often decorated with images of gods or emperors, were also used as a medium of exchange in domestic and international trade.  

Later, the Muslim invasion from the 11th century and the Mughal domination (1526-1857) also reinforced the role of gold. Mughal emperors such as Akbar and Shah Jahan used the metal to create sumptuous jewellery, royal treasures and historic buildings such as the Taj Mahal.

The Golden Temple, ‘Harmandir Sahib’, is located in the heart of the city of Amritsar.

The Indian gold market: organisation and production 

India imports most of its gold, as domestic production remains negligible. Long known for its precious stone mines, India has never been a major gold producer. Moreover, the gold mines in Karnataka and Andhra Pradesh, such as Kolar Gold Fields, are now almost exhausted. This makes India dependent on imports, mainly from countries such as Switzerland, South Africa and the United Arab Emirates.  

Source : India’s gold market update: festival acts as a catalyst for demand | Post by Kavita Chacko | Gold Focus blog | World Gold Council 

This graph shows the quantity of gold imported into India. There are wide variations in these imports, with high demand in the run-up to major festivals such as Dussehra around September-October and Akshaya Tritiya in the spring. The behaviour of demand for gold in India is therefore a determining factor for the gold price.  In general, India imports between 20 and 100 tonnes of gold every month, a trend that is likely to continue in the future.  

The gold market is tightly regulated by the Indian government, which imposes high import duties to reduce the trade deficit. Despite this, a thriving black market persists, making it difficult to fully control the flow of gold. In terms of distribution, India has a vast network of local jewellers and importers. Major cities such as Mumbai, Delhi and Chennai are home to historic markets such as Zaveri Bazaar, known for their expert gold jewellery artisans.

The role of temples in gold accumulation 

Another feature of the Indian gold market is the importance of temples as gold reserves. For example, the Padmanabhaswamy temple in Kerala is considered to be one of the richest in the world, with gold treasures estimated at several billion dollars. In 2011, all hell broke loose when a hidden treasure was discovered in the temple's basement. The treasure included tonnes of gold in the form of jewellery, coins, statues and other objects estimated to be worth more than $22 billion (a much higher value today). This discovery highlighted the role of temples as guardians of both historical and spiritual wealth.

According to historical reports, these riches represent gifts accumulated over the centuries by kings, merchants and devotees. The temple's basements, sealed for generations, were opened after an order from the Indian Supreme Court, revealing chambers filled with priceless treasures. These riches are also the result of centuries of offerings, often made by devotees in gratitude or to obtain divine blessings. This tradition helps to keep a massive quantity of gold out of conventional economic channels. 

It is therefore difficult to distinguish India's stock of ‘marketable’ gold from the quantity of historic objects, some of which are priceless, whose historical or symbolic value exceeds the value of the gold.

The role of the Reserve Bank of India (RBI) in the gold market 

In the Indian gold market, the Reserve Bank of India (RBI) plays an essential role in managing the country's gold reserves. Created in 1935, the RBI is India's central financial institution.  

In 2024, the RBI's gold reserves were estimated at around 850 tonnes by the World Gold Council, making India one of the world's largest holders of gold, after Switzerland and China. In a country as vast as India, this quantity of gold is essential for ensuring the stability of the rupee and boosting the confidence of international markets in the Indian economy. Gold therefore acts as an international hedge.  

In recent years, the RBI has increased its gold purchases, citing strategic reasons such as diversifying its reserves in the face of instability in US dollar-denominated assets. Gold reserves also serve to bolster India's economic credibility on the international stage. India, which is caught between China and the West, is looking to acquire sufficiently stable and independent assets over the long term.

Source : India’s gold market update: festival acts as a catalyst for demand | Post by Kavita Chacko | Gold Focus blog | World Gold Council 

The RBI's gold purchases, which peaked in 2021 and after the start of the war in Ukraine, also seem to be picking up again in 2024.  The RBI's gold purchases reflect the country's economic, demographic and political development. India's economy is expected to grow by more than 8% in 2024, almost twice as fast as China's and almost three times as fast as that of the United States.

Conclusion 

In conclusion, gold is much more than a precious metal in India: it is a cultural symbol, an economic refuge and a historical legacy. It continues to shape the country's identity, while adapting to modern economic realities.  

Gold has many functions in India. Firstly, gold provides an alternative to India's still fragile banking system. The central bank is helping to strengthen the banking system by accumulating a growing stock of gold. Secondly, gold plays a central cultural role (weddings, celebrations, etc.). Finally, gold fuels the temples and the considerable wealth of Indian traditions. But India, with its appetite for gold, was forced to import considerable quantities.