Value Research Warns India's Dhanteras Gold Buys Not Investment
Dhirendra Kumar of Value Research highlights high costs and illiquidity of traditional gold purchases, as India's gold jewellery loans doubled to ₹5 trillion by May 2026.
Investment or Consumption?
Dhirendra Kumar, founder of Value Research, cautions Indian consumers against mistaking traditional gold purchases during the Diwali season, particularly on Dhanteras, for genuine investment. He argues that buying gold jewellery or coins often amounts to consumption, not wealth accumulation.
Kumar points to significant 'making charges' on jewellery, which diminish value immediately, and the ongoing costs of storing coins in bank lockers. He notes that unlike other asset classes, gold is frequently bought on a specific auspicious day, a practice not aligned with typical financial planning.
Gold's Role as Collateral
Despite the investment concerns, gold jewellery holds considerable value as collateral in India. Data from the Reserve Bank of India (RBI) shows outstanding gold jewellery loans from banks reached ₹5 trillion by May 2026, a doubling from the previous year. Including non-banking financial companies (NBFCs), the total for such loans surpasses ₹8 trillion.
Given typical lender margins, the actual value of jewellery pledged against these loans is estimated at over ₹11 trillion, which is nearly a third of India's ₹37.5 trillion in equity mutual funds, according to AMFI.
Liquid Alternatives and Regulatory Action
Kumar suggests that while a small gold allocation can act as an insurance hedge against monetary instability, this differs from impulsive Dhanteras purchases. He advocates for highly liquid and cost-efficient forms of gold holdings for investment purposes, explicitly excluding bangles or necklaces.
Recently, most large fund houses ceased new investments into their gold funds of funds as of 16 October. This action was reportedly prompted by the Securities and Exchange Board of India (Sebi), amidst a weak rupee and anticipated festive import surge. Investors can still acquire gold Exchange Traded Funds (ETFs) via demat accounts on exchanges.
The current advice from Value Research, coupled with regulatory adjustments, points to a shift in how Indian investors should approach gold. The Sebi-prompted halt on gold funds of funds, effective 16 October, suggests authorities are managing gold inflows during peak demand.
This directs investors seeking genuine gold exposure towards more transparent and liquid options like gold ETFs, rather than high-cost physical forms. For consumers, separating the cultural significance of Dhanteras gold from its financial viability becomes crucial for effective wealth planning.
This article is journalism, not investment advice; consult a licensed professional before making financial decisions. Market data is indicative, may be delayed, and should be verified with your broker or exchange before use.
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