Gold prices may be an unexpected source of economic support for India as they increase household wealth and encourage families to monetise their gold holdings, according to a recent Jefferies India Equity Strategy report by Mahesh Nandurkar.
The brokerage estimates that a 10% increase in gold prices could generate around 80 basis points of additional GDP growth or spending through the household wealth effect. However, Jefferies warned that some of the positive impact could be offset by a wider current account deficit as higher gold prices encourage imports.
The analysis has come at a time when gold prices remain extremely high, with bullion at $4,000 an ounce for about a year. If prices stay high, the increase in household wealth could gradually be translated into consumption, borrowing and economic activity.
Indian households hold about $4 trillion in gold
India’s huge household gold holdings are at the centre of the brokerage’s analysis.
The average Indian household currently owns about $4 trillion worth of gold, which is around four times as much as in equities, the report says.
This huge pool of household wealth might be even more important if gold prices rise and consumers begin to unlock the value of their wealth.
Gold is typically held by Indian families as a source of wealth, a source of financial security and a property they can pass from generation to generation. However, only a portion of the holdings are used for liquidity generation.
Jefferies believes this leaves considerable room for greater monetisation.
Gold Loans Could Be the Key Transmission Channel
One of the most important channels through which higher gold prices could influence the economy is the gold loan market.
Gold-backed lending in India has expanded rapidly and is estimated to be $199 billion as of March 2026 (Jefferies). Gold loans are now a larger share of lending by banks and non-banking financial companies.
As such, the brokerage estimates that only about 15% of household gold holdings are currently monetised. If gold prices continue to rise, there is much scope for further growth.
As pledged gold increases, borrowers can access more liquidity against the same underlying asset, subject to lending rules and loan-to-value limits. That could be in relation to household spending, business requirements and other economic activities.
Jefferies adds Manappuram Finance and other stocks
Jefferies has added Manappuram Finance, Hindustan Zinc, Navin Fluorine and Meesho to its model portfolio.
Among these companies, Manappuram Finance is one of the companies that has the greatest potential to benefit from increasing gold monetisation as it originates from gold-backed lending.
As more households want to unlock the value of their gold holdings, organised gold-loan providers could potentially see greater demand. This could strengthen the role of formal lending channels in India’s broader financial system.
Hindustan Zinc provides exposure to metals and could benefit from the wider commodity backdrop, while Navin Fluorine has been included because of its expected earnings growth.
Meesho also has exposure to potential increases in mass-market discretionary consumption. If more household wealth translates into more spending, consumer-based companies could potentially benefit from the resulting increase in demand.
Titan, Kalyan and Gold-Focused Lenders Also in Focus
Jefferies also mentioned other companies and businesses that could benefit from a sustained gold-price rally.
Jewellery companies like Titan and Kalyan could benefit from higher gold prices and continued consumer demand, but how much the increase in gold will impact volumes and margins depends on how consumers respond to high prices.
The broker also identified the Multi Commodity Exchange (MCX) and gold-focused lenders like Muthoot Finance and IIFL Finance as potential beneficiaries.
Gold-focused financial companies may benefit the most if higher bullion prices encourage more consumers to pledge jewellery or other eligible gold assets to raise funds.
Wealth effect has risk
Although Jefferies sees great potential from India's household gold wealth, it also highlighted an important macroeconomic risk.
Higher gold prices could encourage greater gold imports and thus increase India’s current account deficit (CAD). So some of the economic gain from the wealth effect might be compensated by greater import expenditure.
The overall effect will depend on how much of the additional household wealth is converted into actual spending, investment or borrowing.
The big takeaway for investors is that gold’s role in India’s economy can go beyond its traditional role as a store of value. If prices remain high in the near future, the country’s vast household gold holdings can become a source of liquidity and economic activity as well if prices stay high.
Jefferies' latest stock picks reflect this wider theme in the latest stock list of stocks, with gold-loan providers, metals companies, chemical manufacturers, and mass-market consumer platforms among the names that will benefit from different elements of the potential wealth effect; among them are expected to be the ones most likely to benefit from the impact of this wealth effect.
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