Indians sitting on a goldmine, and it's worth $1 trillion!

Indians’ fascination for gold is stuff that dreams are made up of. This is borne out by the fact that the value of the gold held by Indian households is now at a mind-numbing $1 trillion. To give you a perspective, India’s gross domestic product (GDP) is around $1.8 trillion while the BSE stock market capitalisation is $1.4 trillion.

[caption id=“attachment_58186” align=“alignleft” width=“380” caption=“Over the past one year, the yellow metal has appreciated by as much as 30% in value. Reuters”]  [/caption]

Over the past one year, the yellow metal has appreciated by as much as 30% in value. Since January 2011, it spiked 17%.

According to World Gold Council estimates, Indians hoard about 18,000 tonnes of gold. UK’s RBS Bank estimates that if one excludes 459 tonnes held by the Reserve Bank of India, non-government holding is around 17,500 tonnes or $1.03 trillion.

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It is not clear how much proportion of gold is hoarded by investors. Analysts point out that prices in every market are under pressure. “Investors have no option but to stay with gold for now,” said a wealth manager who advises private clients.

However, stock market pundits have now suggested to investors that it’s time to look at equity as an avenue of investment. This could mean that investors would start selling gold and book profits. Gold prices have doubled in just about three years. This could mean that investors would have to book profits in gold. “There is no for an over-exposure to gold. We are advising customers to hold 5-10 percent of their money in gold,” the wealth manager added.

RBS has also estimated the equity exposure of Indian households. The bank said Indian households’ equities exposure, excluding promoter stakes, is at $257 billion as of 5 August, 2011. The value of this holding has declined $33 billion since the beginning of 2011. This includes indirect investment through domestic institutional investors like insurance companies and mutual funds.