Gold is up 50% in 2025: SBI calls for national gold policy as prices surge

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As gold smashes fresh records in 2025 — rising over 50% year-to-date — India’s biggest lender, State Bank of India, says the metal’s wild rally is no longer just a festival-season story. It’s now a global fear gauge, a hedge against war, inflation and a weakening US dollar — and increasingly, a serious asset-allocation call for Indian households.

 

In a new study titled “Coming Of (A Turbulent) Age: The Great Global Gold Rush”, SBI says India urgently needs a national gold policy, because the country remains deeply tied to the yellow metal — culturally, financially, and now geopolitically too.

 

It said the gold price has a direct impact on the USD INR exchange rate too, owing to the country's huge dependence on gold imports. The two are highly correlated, around 0.73, implying that higher gold prices are associated with Indian rupee depreciation, though the average import quantum makes it not a too significant factor.

 

SBI study said China has a national policy on gold, which has a specific purpose. It has a comprehensive approach to reshaping how gold is traded, stored, valued, and used in international commerce. It represents a coordinated approach to addressing several economic and geopolitical priorities simultaneously.

 

On India's gold policy till now, it said, "if one were to take an objective view of the policy discussions on gold since 1978, one finds that the major thrust has been to wean away the masses from physical gold. They were therefore only short-term in horizon".

 

"The time has now come to conceive a comprehensive policy on gold, and for such it is important that one defines what gold is (commodity or money) and how gold is perceived by its ultimate consumer," the report said.

 

India loves gold — and investors are doubling down

 

India consumed 802.8 tonnes of gold in 2024

 

26% of global demand, second only to China

 

Gold ETFs AUM jumped 165% YoY (to ₹90,136 crore)

 

Allocations are rising from 5% to 10–20% in portfolios

 

With prices crossing $4,000/oz (₹70,000+ per 10g domestically), SBI says investors now view gold not just as jewellery — but as a serious wealth stabiliser.

 

But soaring gold comes with risks

 

Gold’s price surge isn't from stronger demand alone — it’s riding on fear and speculation.

 

SBI warns:

 

Gold may stay detached from intrinsic value in the short term

 

That means while gold protects money during global stress, it can correct sharply when sentiment shifts.

 

Translation for investors:

Gold works as insurance — don’t confuse it with guaranteed returns.

 

 Why this matters for your money

 

India imports 86% of its gold, so rising prices weaken the rupee — and vice-versa. Government schemes like Sovereign Gold Bonds (SGBs) aimed to reduce physical buying, but the report notes these now carry ₹93,284 crore in capital loss on the government's books due to soaring redemption value.

 

So while investors win on SGBs, policymakers bear the cost — one reason SBI calls for a long-term gold strategy, including ideas like:

 

• Gold-backed pension schemes
• Stronger recycling infrastructure
• Domestic gold storage & local mining

 

Good news: new mines discovered in Odisha, MP and Andhra Pradesh may help reduce import dependence over time.

 

Moreover, increased returns of gold as an asset class have led to huge inflows in gold ETFs. In FY25 (Apr-Sep), inflows in gold ETF jumped 2.7 times, and in FY26, it increased 2.6 times. The net asset under management of Gold ETF increased to Rs 901.36 billion as on Sep'25, representing a 165 per cent rise year-on-year (yoy).

 

"Gold is actively being considered for enhanced asset allocation now (10-20 per cent of portfolio as against about 5 per cent earlier)...The stoic pitch by asset allocators and fund managers globally can continue anchoring 'higher highs' for the gold prices, dancing to the whims and fancies of investors and speculators that may keep it detached from the 'intrinsic value' long cherished by connoisseurs and prospectors alike," the report said.

 

The report noted that countries such as the US and Germany hold more than 77 per cent of their total reserves in the form of gold. RBI held 15.2 per cent of its reserves in gold in FY26 (till October 10) compared to 13.8 per cent in FY25 and 9.1 per cent in FY24.

 

In terms of reserve change, RBI's gold reserves have increased by $25 billion in FY25 and $27 billion in FY26 so far till October 10, 2025, mainly due to valuation increase.

 

In terms of quantity, the Reserve Bank added only 0.6 tonnes of gold in FY26 (Apr-Sep) compared to 31.5 tonnes in FY25 (Apr-Sep).

 

"However, there has been a great emphasis on storage localisation, a prudent move indeed, going by the fractured lines of policy upheavals globally," the report said.

 

Domestic supply of gold is only a fraction of the total gold supply in India, with imports contributing around 86 per cent of the total supply in 2024, as per the World Gold Council estimate.

 

So how much gold should you own today?

Planners typically recommend:

 

Conservative investors: 5–10% gold exposure

Balanced investors: 10–15%

Aggressive / HNIs: 15–20% (max)

Avoid crossing 20% — gold stabilises wealth, it doesn't create long-term compounding like equities.

 

Best ways to invest

 

Prefer financial gold over physical gold:

 

Best options:

 

Sovereign Gold Bonds (SGBs) — 2.5% annual interest + zero capital gains tax at maturity

Gold ETFs / Gold mutual funds — good for SIPs and liquidity

 

Use sparingly:

Digital gold — only via regulated platforms

Physical gold — emotional value but storage cost, no returns, making charges 

SBI Research concludes that gold is undergoing a “structural transformation”, evolving from a passive store of value into an active financial asset. “While the world redefines gold as a strategic reserve instrument,” the report warns, “India continues to view it largely through a sentimental and ornamental lens.”

 

In essence, the rally that enriched India’s reserves has also exposed its vulnerabilities—dampening demand, swelling fiscal liabilities, and tightening the link between global gold markets and domestic financial stability