The yellow metal is not just a sign of wealth, but a form a security
Indians and their love for gold is well-known. From weddings to worship, the precious metal plays a key role in the nation’s cultural fabric and is a symbol of prosperity, wealth and status.
Gold holds significant cultural and spiritual value, especially in Hindu and Jain traditions. According to the ancient lawgiver Manu, wearing gold ornaments was deemed essential for important ceremonies and occasions. Beyond the major celebration of Diwali, gold is an integral part of regional festivals across India. In the south, it features prominently in festivals like Akshaya Tritiya, Pongal, Onam, and Ugadi; in the east, during Durga Puja; in the west, during Gudi Padwa; and in the north, for Baisakhi and Karva Chauth.
Gold also plays a central role in personal milestones, particularly in marriage. Gifting gold is a longstanding tradition in Indian weddings, which account for nearly 50% of the country’s annual gold demand.
A glittering asset class
A 2022 news report estimates that the gold held privately by Indian families (not the RBI) amounts to a staggering 25 to 27,000 tonnes of gold! Contrast this with the RBI: their total holdings of gold as of November-end 2024 is estimated at 876 tonnes. A stark contrast to the amount of gold owned by Indian families.
What’s important to note is that gold holdings are not concentrated solely amongst the affluent and super-rich, but trickles down to the middle classes, lower middle classes, and even sections of society considered “less privileged.” And there’s a reason for this love for gold across the board: it’s not just an adornment, but an investment.
Indians look at gold as an investment and it is a coveted asset class with the numbers to prove it. A report from the World Gold Council shows that gold ended 2024 as the best performing asset class (despite a price moderation in November and December) posting year on year gains of 21%.
Gold consumption by numbers
According to data from the World Gold Council, India imported over 724 tonnes of gold in 2024. South India dominates India’s gold jewellery consumption, and accounts for about 40% of the total volume. The Southern states also boast of the highest per capita gold consumption. An estimated third of India’s gold is consumed in Kerala, where buyers lean towards 22-karat gold jewellery, compared to 18-karat and gold of less purity in the rest of India. The average, middle-class Kerala bride is said to enter her marital home with 320 grams of gold, the highest in the country.
But how did Kerala become so invested in (and even obsessed with) gold? Well, it started centuries ago, with the pepper trade.
Kerala: Trading black gold for yellow gold
Kerala’s connection with gold dates back over 5,000 years, when global trade in spices like pepper began. Pepper was so valuable it was exchanged for gold, attracting Greeks, Romans, Jews, Arabs, and Chinese traders to the region. By 300 BCE, the Greeks and Romans settled around the town of Kodungallur, exchanging spices, ivory, and diamonds for gold.
In fact, spices like pepper, cinnamon and cardamom were so prized that Greeks, Jews, Arabs and even the Chinese had no qualms parting with gold to obtain them. Keralites who owned gold in those days were bound to have had trade relations with foreigners.
The arrival of Jews and Christians further fuelled the demand for skilled gold artisans to craft crowns and vestments for bishops. Gold became not only a form of currency but a symbol of social status, a tradition that continues in Kerala today.
Religious and cultural significance
In Kerala, it’s said that even God loves gold! The Sree Padmanabhaswamy Temple in the state capital Thiruvananthapuram is renowned for its extraordinary collection of gold, accumulated by the Travancore royal family over thousands of years. This temple, regarded as the wealthiest in the world, became the focal point of attention when six of its secret vaults were opened under the orders of the Supreme Court of India. The vaults contained vast amounts of gold, valued at approximately $22 billion, including golden idols, an 18-foot-long diamond necklace, and numerous bags of gold coins from various parts of the world. Estimates suggest that the total value of the gold across all vaults, including those that remain unopened, could amount to as much as $1 trillion.
Temple vaults aside, gold occupies a central and symbolic role in the cultural and religious life of Kerala, deeply intertwined with both social practices and spiritual beliefs.
The purchase and gifting of gold jewellery are integral to various occasions, from weddings to major festivals such as Onam and Vishu. Notably, gold sales experience a marked increase during these festivals, with Vishu—celebrated annually in April—being particularly associated with gold. During this time, gold coins and ornaments are commonly exchanged, and gold is offered as part of the pooja ritual.
The significance of gold begins at birth, when it is customary to gift newborns gold ornaments. Through the course of life, gold remains an essential part of a Malayalee’s existence. During naming ceremonies, newborns are given honey and vayambu (sweet flag plant) mixed with 24-carat gold. In the Vidyarambham ceremony, dedicated to Saraswati, the Goddess of Learning, elders use a gold ring to trace letters on a child’s tongue, symbolising their formal entry into the world of knowledge.
Thus, gold plays a vital role in marking and sanctifying key life milestones: birth, educational initiation, puberty, communion, graduation, marriage and beyond.
A liquid asset and security net
Kerala’s deep affinity for gold can be partly attributed to factors such as the Gulf boom and the rubber boom, which benefited both private plantation owners and the state. In a period when industrial growth was limited and investment opportunities were few, land and gold emerged as the most popular assets. Gold, in particular, was favoured due to its high liquidity, making it an attractive choice for investors across all income groups.
For example, women in Kerala, particularly those from lower-income groups who are part of the state government’s Kudumbashree women’s self-help groups, receive lump-sums of money, which they use to purchase gold from local jewellers. These purchases are often hidden from the men in their family and tucked away for a rainy day. Unlike cash which ends up being spent on daily necessities, gold becomes a form of security for the future: something they can mortgage or sell during a crisis.
With Kerala accounting for close to 40% of the nation’s gold consumption, it is both an asset and a financial tool. A key element of Kerala’s glittering gold market is the thriving gold loan market, with NBFCs like Muthoot Finance and Manappuram Finance disbursing “instant” cash loans against gold as collateral. In recent years, public and private sector banks have also entered the fray.
According to the latest annual reports, three Kerala-headquartered NBFCs collectively hold nearly 300 tonnes of gold. Muthoot Finance, the largest among them, possesses a staggering 180 tonnes, while Manappuram Finance holds 58 tonnes, and Muthoot FinCorp has 55 tonnes.
As gold prices continue to climb, more individuals are turning to the pledge market, bringing increasing volumes of gold to the table. With prices hitting record highs, many people are leveraging their gold to meet financial needs, driven by higher disposable incomes.
Kerala is one of the largest markets for gold-backed loans, a fact underscored by the latest data from the State Level Bankers’ Conference (SLBC). As of September 2023, the total outstanding gold loans in the state’s banking sector—encompassing public, private, and cooperative banks—stood at an impressive Rs 72,864 crore.
Among the key players in this booming sector are Canara Bank, with a dominant share of Rs16,776 crore in gold loans, followed by State Bank of India at Rs 14,990 crore and Federal Bank at Rs 8,113 crore. The steady rise in gold prices and the increasing availability of gold as collateral are likely to keep this market growing, making gold loans a cornerstone of Kerala’s financial landscape.
A TOI story states that banks report that gold loans cover upto 40% of all lending and have low default rate, which goes to show just how essential gold is as an asset class and financing tool for Malayalis. And going by current trends, it doesn’t look like gold will lose its sheen in God’s Own Country anytime soon.