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Summary: The Prime Minister has asked Indians to defer gold purchases. The appeal makes sense for one kind of buyer and is largely irrelevant for another. Most people don't know which category they're in and that distinction changes what you should actually do.
Prime Minister Modi's appeal to defer gold purchases, made on May 10, 2026, citing a stretched rupee, an unsteady West Asia and a rising import bill, is worth taking seriously. But the answer is not the same for every kind of gold buyer.
If you were planning to buy jewellery, the appeal applies fully. If you were planning to invest in gold, the picture is more nuanced. Understanding the difference is what this piece is about.
What the appeal actually means
India imports almost all of its gold. It does not mine meaningful quantities domestically. Every rupee spent on gold, whether as jewellery, coins or bars, eventually requires foreign exchange to pay for the import. When the rupee is already under pressure and the import bill is rising, a surge in gold demand makes both worse.
Here is the mechanism. India pays for gold imports in dollars. When demand rises, more dollars leave the country, putting downward pressure on the rupee. A weaker rupee makes every subsequent import—oil, electronics, machinery—more expensive. That feeds into inflation, which hurts ordinary households most. The PM's appeal is more arithmetic than sentimental.
Jewellery, ETFs and SGBs. Three very different things.
At the import level, gold is gold. Indian jewellery makers import gold bars and convert them domestically. Gold ETFs and mutual funds require fund houses to do the same, purchase physical gold bars to back the units they issue. The import burden is similar across both.
The distinction that matters is not import burden. It is cost efficiency and purpose.
Sovereign gold bonds (SGBs) are the genuine exception. The government issues a paper instrument linked to gold prices. No physical gold is purchased or imported. Subscribers who bought at issuance could hold for eight years and collect both the 2.5 per cent annual interest and the tax-free gain at maturity. However, new SGB issuances have stopped. The last time the Reserve Bank of India (RBI) issued a fresh tranche of sovereign gold bonds was over two years ago.
Gold ETFs and mutual funds require physical gold imports, like jewellery. But they are a cost-efficient way to hold gold. No making charges, no GST on the gold value and no resale haircut.
Jewellery is where the appeal bites hardest, and not just because of imports. Indian jewellery makers import gold bars and convert them domestically, so the import burden is the same as for ETFs. But jewellery adds making charges of 10 to 15 per cent and GST on top. These costs are non-recoverable. A buyer who treats jewellery as an investment is overstating their wealth by that margin from the moment of purchase. Jewellery is consumption. The PM's appeal is directed squarely at it.
Gold's job is insurance, not growth
Before acting on the appeal or ignoring it, it helps to be clear about what gold is actually doing in your portfolio.
Gold deserves 5 to 10 per cent of an investment portfolio. Not as a growth bet, but as insurance. Equities compound wealth over decades. Debt protects capital and pays interest. Gold's job is different. What it does, occasionally and unpredictably, is hold its value when the currency weakens and global confidence cracks.
This is precisely the moment that allocation was built for.
Three episodes make the point clearly. In 2013, the US Federal Reserve signalled it would reduce its bond-buying programme. Emerging market currencies, including the rupee, fell sharply. The 2020 pandemic shock and the 2022 energy crisis followed the same pattern. In each case, the rupee weakened and gold rose in rupee terms. A portfolio that held some gold through those years was steadier, not richer. Insurance is not meant to make you wealthy. It is meant to make you less anxious when the rest of the portfolio is having a difficult year.
The temptation now, with gold up sharply and the news flow tense, is to add aggressively. That is not what insurance is for.
Check your allocation, then act
Add up your gold ETFs, gold mutual funds and sovereign gold bonds. Leave jewellery out. That is consumption, accounted for separately. Express the total as a percentage of your investible assets.
If the number is between 5 and 10 per cent, do nothing. Your allocation is doing its job.
If it is below 5 per cent, the case for adding exists on portfolio grounds. If it is above 10 per cent, trim back toward your target. The proceeds belong in equity, debt or cash, wherever your overall plan is light. This is rebalancing, not market timing. The PM's appeal has no bearing on it.
Stay close to the plan
Treat gold as insurance. Like any insurance, you buy it before you need it, not when the headlines tell you to.
The PM's appeal is a reasonable ask of Indian households on a question of consumption. For jewellery buyers, it deserves serious consideration. For investors already within their 5 to 10 per cent allocation, it is not a reason to change the design of the portfolio. If the design was sound to begin with, the job now is to stay close to it.
Also read: Read the signal, not the list
This article was originally published on May 14, 2026.
Disclaimer: This content is for information only and should not be considered investment advice or a recommendation.
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