New Delhi, Oct 10 : India's household wealth held in gold is estimated at 34,600 tonnes, worth around estimated at $3.8 trillion or 88.8 per cent of GDP. This is providing a positive wealth effect on the household balance sheet, with gold prices scaling new highs, according to a Morgan Stanley report released on Friday.

Gold prices are currently at all-time highs, trading around $4,056 per ounce, with domestic prices also reaching record levels of around Rs 127,300 per 10 gms. Year to date, gold prices have risen by 54.6 per cent in US dollar terms and 61.8 per cent in INR terms, the report states.

A preference for financial assets by households has meant that investing in gold through ETFs has picked up recently, with ETF flows tracking at US$1.8bn in the last 12 months. This trend is expected to continue, the report further states.

India remains the world's second-largest consumer of gold, accounting for about 26 per cent of global demand, just behind China at 28 per cent.

Traditionally, household consumption represents the bulk of this demand, but there has been a notable increase in central bank purchases at the margin. The Reserve Bank of India (RBI) has added approximately 75 tonnes to its gold reserves since 2024, bringing its total holdings to 880 tonnes, which now constitute about 14 per cent of India's total foreign exchange reserves, the report observes.

While gold consumption in value terms has risen to $ 68 billion on a 4q trailing basis as of June-25 as per WGC data, in volume terms it remains steady at around 767 tonnes, far below the peak of 1145 tonnes in QE June-11.

A benign inflation trend ' averaging 5 per cent year-on-year since the adoption of the flexible inflation targeting framework in 2016 ' combined with positive real interest rates (averaging 1.7 per cent since policy normalisation post pandemic), has helped contain gold imports within a range of 1-1.5 per cent of GDP.

This is significantly lower than the all-time high of 3.3 per cent of GDP recorded in May 2013. Sound macroeconomic stability has helped ensure that households do not develop an excessive preference for saving in physical assets, thereby containing gold imports and easing pressure on the current account deficit, the report added.

/IANS