On Sunday in Hyderabad, Prime Minister Narendra Modi did something unusual: he asked Indians to defer gold purchases for a year. He bundled it with a broader appeal — skip foreign holidays, reduce cooking oil, return to work-from-home where feasible, prioritise Made-in-India goods — but the gold ask landed hardest. In a country where gold is woven into weddings, births, religious ceremonies, and the financial planning of nearly every household, asking 140 crore people to pause is not a casual request.
Within hours, two camps formed. One called it sensible patriotic statesmanship in a genuine crisis. The other called it financial repression dressed in tricolour — an attempt to transfer the cost of the forex squeeze from the government's balance sheet onto the household's.
Both camps are partly right. Both are partly wrong. This column walks through what each side actually argues, where it is strongest, and where it breaks down — then gives a real recommendation, not a hedged non-answer.
The macro picture both sides agree on
Before the disagreement, the facts. Brent crude is above $120 a barrel. The Strait of Hormuz — carrying roughly a fifth of global oil — has missiles flying around it. India imports about 85% of its crude and almost all its gold. The country's daily fuel-stabilisation bill is running at ₹1,600–1,700 crore. The annual gold import bill, normally $35–45 billion, climbs higher at record gold prices, which is where prices currently sit at around ₹1.5 lakh per 10 grams.
The current account deficit is widening. The rupee is exposed. The RBI's forex reserves, while still substantial, are not infinite. None of this is in dispute. The disagreement is about what the household should do about it.
The contrarian case (buy anyway)
- • Gold has outperformed PPF, NPS, FDs over 5 years
- • BofA $5,000, Goldman $4,900 targets by Dec 2026
- • Central banks bought 244 tonnes in Q1 2025 alone
- • Gold is intergenerational insurance, not just investment
- • Government appeal may signal upcoming duty hikes — buy before
The compliance case (heed the appeal)
- • Mass gold buying during forex squeeze causes the rupee crash (1991 precedent)
- • BofA/Goldman targets are only 5–10% above spot — modest upside
- • Physical jewellery loses 15–25% value the moment it leaves the showroom
- • SGBs (untargeted by the appeal) give better gold exposure anyway
- • A rupee crash raises EMIs, fuel, medicine — far more costly
The case for buying gold anyway
Gold has been one of the best-performing Indian asset classes for the past five years. It has outperformed PPF, NPS, fixed deposits, and most actively managed mutual funds. Global banks — Bank of America at $5,000 per ounce by 2026, Goldman Sachs at $4,900 by December 2026, JPMorgan bullish — project further upside. The structural drivers are stacking: central banks bought 244 tonnes in Q1 2025 alone and have not stopped; the dollar's reserve status is being questioned seriously for the first time in fifty years; geopolitical tail-risk is elevated; inflation in developed economies is sticky.
The cultural argument is real too. Gold in India is not an investment in the textbook sense. It is intergenerational insurance — an asset a family hands a daughter that no court, no in-law, no banking system, and no government can easily seize, freeze, demonetise, or inflate away. For a country that has lived through demonetisation in 2016, capital controls, retroactive tax cases, and the routine debasement of fiat instruments, the attachment to gold is not superstition. It is memory.
The strongest version of this argument is the political-economy one. When a government publicly asks citizens not to buy gold, the historically literate response is to ask whether the next move is import duty hikes or fresh disclosure schemes. If the appeal works and millions defer purchases, gold dips and the contrarian buyer accumulates at lower prices. If it fails, gold continues climbing. Three scenarios — and none of them obviously favours the household that complied.
The framing the contrarians offer: this is risk transfer, not patriotism. The State improves its external accounts by asking the household to sit on a depreciating rupee while gold appreciates in dollar terms. The hedge the household needs most during a forex squeeze is exactly the one being discouraged.
The case for heeding the appeal
Start with the 1991 parallel. When 30 crore middle-class households each "rationally" load up on gold to hedge a weakening rupee, they collectively cause the rupee crash they are hedging against. This is not theoretical — it is precisely what happened in 1990-91, when household gold buying accelerated as the rupee weakened, and India ended up airlifting 47 tonnes of RBI gold to the Bank of England to avoid default. Indians remember demonetisation. Indians should also remember Chandra Shekhar's gold flight.
The forecasts the bulls cite are not asymmetric upside cases. BofA's $5,000 target is roughly 10% above spot. Goldman's $4,900 is roughly in line. These are continuation calls from sell-side desks paid to generate trading volume — the kind of calls that get blown out the moment the Fed turns hawkish, West Asia de-escalates, or Chinese central bank buying pauses. Gold corrected sharply in 2013, 2015, and 2020. The buyer who loads up at record highs because the Prime Minister told them not to is not being contrarian. They are being late.
Then there is the vehicle problem. The PM's appeal targets physical jewellery — the single most economically wasteful form of gold exposure in the Indian economy. A family planning to buy 100 grams of wedding gold at current prices spends about ₹15 lakh on metal, plus 3% GST, plus 8–15% making charges. Total outlay closer to ₹18 lakh, for an asset that loses 15–25% of its retail value the moment it leaves the showroom. The PM did not ask Indians to sell their existing holdings. He did not target sovereign gold bonds, which the government itself issues with a 2.5% annual coupon on top of gold price exposure.
A weakening rupee hurts the household far more than a deferred gold purchase does. Imported inflation from a forex squeeze raises the price of fuel, edible oil, electronics, and medicines — everything the household buys. That is the cost being averted. The deferred wedding purchase is the much smaller cost being requested in exchange.
Where each side is weakest
The contrarian case breaks down on: vehicles
Even if you are bullish on gold, buying physical jewellery at peak prices and peak making charges is a bad way to express that view. Gold is actually four different products — jewellery, coins/bars, ETFs/digital gold, and sovereign gold bonds — with radically different cost structures. A bullish gold view executed through SGBs is roughly 20% more cost-efficient than the same view executed through jewellery, with superior tax treatment. Almost no contrarian gold column makes this distinction.
The contrarian case also breaks down on: 1968 Gold Control Act fears
Modern India has neither the political appetite nor the administrative capacity for that kind of clampdown. Sovereign gold bonds, gold ETFs, and digital gold are explicitly government-encouraged channels. The State is not anti-gold. It is anti-physical-bullion-import-bill, which is a different thing entirely.
The compliance case breaks down on: trust
It assumes the State's interests and the household's interests are aligned, when Indian economic history — 1969 bank nationalisation, 1971 wealth tax, the 1991 gold airlift, 2016 demonetisation — is full of moments when households who trusted the State paid the price. Saying "the government is asking nicely this time" is true. Saying "therefore comply without hedging" is a leap the record does not fully support.
The compliance case also breaks down on: signalling
A Prime Minister publicly asking the world's second-largest gold consumer to slow down is itself a signal about how stretched the macro situation actually is. Pretending this contains no information about future policy direction requires a kind of faith in benign incrementalism that has not always been rewarded.
What the actual answer looks like
Both sides have presented this as a binary: buy gold defiantly, or defer dutifully. The honest answer is neither.
If you already have 5–10% of your net worth in gold
Leave it alone. You are well-positioned for a forex squeeze. Adding more at record highs is not a hedge — it is a concentrated bet on continued geopolitical crisis, and that bet is already partly priced in.
If you have zero or near-zero gold allocation
The contrarians are right that you are unhedged. But the compliance camp is right about how to fix it. Top up through sovereign gold bonds, not physical jewellery. SGBs give the same price exposure plus 2.5% annual interest, no GST, no making charges, and capital gains exemption if held to maturity. The PM's appeal does not target SGBs.
If you were planning to buy wedding or ceremonial jewellery this year
Defer if you can. Not because Mother India needs you to, but because you are paying peak prices for the least efficient form of gold exposure in a year when global forecasters are calling for only 5–10% further upside and the downside risks are real. The boring truth is that deferring is better personal finance, and the patriotic framing is incidental.
If the wedding cannot be deferred
Buy what you need, but consider buying less than originally planned, and redirect part of the budget to SGBs that the family holds as long-term wealth. A bride is not less loved because the necklace is 60 grams instead of 100. The grandmother who stitched a sovereign into a sari blouse was hedging real risk — but she did it efficiently. The modern equivalent is a sovereign gold bond.
The point neither extreme will concede
The contrarians are right that the State is asking households to absorb a cost — and that "patriotism" is doing rhetorical work the underlying economics cannot fully justify. A rupee under pressure benefits from lower gold imports. A household holding rupees instead of gold does take on more currency risk. That trade-off is real.
The compliance camp is right that household-level "rational" gold-loading during a forex crisis is collectively destabilising — and that the appeal, taken narrowly (defer high-cost jewellery, not all gold exposure), is genuinely better personal finance for most middle-class Indian households at current price levels.
The synthesis is uncomfortable for both camps. The Prime Minister is making a reasonable ask in a real crisis, and the reasonable ask happens to align with what disciplined household finance would suggest anyway. Patriotism and self-interest are pointing in the same direction this time — which is rare enough to be worth noticing.
So, should you buy gold today?
Physical jewellery at ₹1.5 lakh/10g plus making charges — probably not, regardless of what you think of Modi.
Topping up through sovereign gold bonds or low-cost ETFs — probably yes. The appeal does not meaningfully discourage this.
Holding your existing gold — obviously yes. Nobody is asking you to sell.
The household that thinks about four different gold vehicles with very different cost structures — rather than the rally speech or the Twitter discourse — will be the household that comes out of this year ahead.
The author is not a SEBI-registered financial advisor and nothing in this column constitutes investment advice. Gold prices can be volatile. Past performance does not predict future results. Consult a qualified professional before making investment decisions.