Independent Research and Policy Advocacy

Savings in Gold by Low-income Households

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Investment in gold by Indian households is motivated by social, economic, and cultural factors. One out of every ten households buy gold annually or more frequently; usually in the form of jewellery, followed by coins and bars and an average Indian household allocates 11% of their wealth in gold bullion. Gold or gold backed products are used to mobilize savings, hedge against inflation, collateral for borrowing loans as well as an instrument for liquidity management by households. The objective of this research brief is to explore gold as a financial instrument, particularly for low-income households in India. To understand this better we conducted a brief overview of the literature on the retail gold sector, households’ gold consumption behaviour and policies or schemes rolled out by the government in India to formalize the informal gold sector. We also analyzed the transaction behavior of remote rural households into a gold based micro-savings products using administrative data from Dvara SmartGold.

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