Gold Rush 2.0? Uncovering the Explosive Rise of Gold & Loans

Gold Loan Demand Skyrocketed 87%, Crushing Other Personal Loans. But What's Behind This Trend?

Gold just shattered records in March 2025, surging 15.4% globally and 14% domestically in FY25, marking one of its strongest yearly performances in a decade!

But what’s fueling this rally?

• Inflation
  Even after aggressive rate hikes in 2022–2023, inflation is still hanging on. Now, with central banks cutting rates again, fiat currencies are weakening, making gold the go-to safe haven.

• Dollar’s Fall
  Countries like China, Russia, and Middle Eastern nations are moving away from the U.S. dollar, opting to pile into gold instead. Central banks are buying gold at record levels, cementing its role as a trusted store of value.

• Global Chaos

  From tensions in the South China Sea to the war in Ukraine and Middle Eastern instability, uncertainty is driving investors toward gold.

So, it looks like, when the times are turbulent people tend to resort to Gold.

And when gold prices rise, gold loans often follow - just as we are seeing now.

Gold loans surged 87% in February 2025, outpacing personal, home, and car loans!

But it’s not new..

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History repeats itself!

Remember when India had to airlift 67 tons of gold to secure an emergency loan? You probably don’t, because you weren’t born yet!

1991 Balance of Payments (BoP) Crisis

• In 1991, India ran out of foreign exchange reserves - barely enough to cover three weeks of imports. Being on the brink of default, India had to pledge 67 tons of gold to the International Monetary Fund (IMF) to secure a $2.2 billion bailout.

• This increased demand pushed gold prices up to around ₹3,466 per 10 grams by the end of 1991 and gold loans increased by an estimated 20-25% during the crisis period!

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Remember when McDonald's in Indonesia stopped listing prices on the menu because the rupiah was depreciating so fast, that they couldn’t update them in time?

1997 Asian Financial Crisis

• The 1997, a crisis happened in Asia due to excessive foreign debt and weak financial systems in Asian countries. This led to a loss of investor confidence, causing capital outflows and currency devaluation. We discussed it in depth in our last newsletter.

• The ripple effects of the Asian Financial Crisis led to capital outflows from emerging markets, including India. The Indian rupee depreciated, and investors resorted to gold. Its prices steadily increased crossing ₹4,000 per 10 grams and gold loans demand increased by an estimated 15-18%!

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Remember when we all were locked into our homes? Ah, you do remember very well! (chuckles)

2020 COVID-19 Pandemic

• The pandemic disrupted supply chains and caused a global recession, leading to huge stimulus packages. Gold again emerged as the ultimate safe-haven asset amid fears of prolonged economic instability.

• By August 2020, gold prices in India reached a record high of ₹56,200 per 10 grams, and India saw a 21% rise in gold loan disbursements in FY21 as families and small businesses used their gold to tide over the crisis!

In all these moments of crisis and volatility, people turned to gold and gold loans. So, all I am trying to tell you is, it’s a trend well observed in the history and its nothing new.

Now, let’s understand the underlying pattern behind this event!

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Why Is Gold Loan Demand Up 87%

Buying gold as a store of value while leveraging it for cash. Both trends have been seen to surge together!

If this seems a bit contradictory? Let’s break it down and see why it actually makes perfect sense!

As discussed, demand for gold increases with economic uncertainty, inflation, or geopolitical tensions. People need new cash in these situations due to rising expenses, business needs, medical emergencies, or whatsoever.

Hence, they resort to loans.

Gold loan is one option and other loan options include personal loans, loans against property (LAP), credit card withdrawals, and peer-to-peer (P2P) lending.

For a matter of fact, personal loans are one of most popular way of getting cash. But yet gold loan is the most preferred choice today, here’s why:

• Faster Approval Speed: Gold loans are approved within hours since they are secured by collateral.

• Lower Interest Rates: Compared to personal loans, gold loans have lower interest rates due to their secured nature.

• Quick Processing Time: Minimal documentation and instant disbursal make gold loans one of the fastest financing options.

• Best Choice Under New Rules: With RBI’s tightening of personal loan approvals, gold loans have become a preferred borrowing option.

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Too Fin To Know! Did you know that India’s personal loan market grew by over 20% annually before these regulations were introduced? However, the RBI stepped in to prevent a possible “credit bubble” where too many unsecured loans could create financial instability. So, while the new rules make borrowing tougher, they also aim to protect the economy from future shocks!

Interesting? share this with a friend!

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India has a special love for gold running deep into its cultural traditions. Looking at history we realise that in market volatility, investors rush to gold as a store of value, despite its rising prices

But how safe Gold really is?

Not much during sector-specific declines or company failures

When Meta faced a sharp stock price drop in 2018 due to privacy scandals and regulatory concerns, it was an issue specific to the technology sector. In such cases, gold did not act as a reliable hedge because the broader economy was not in distress.

Similarly, when Enron collapsed in 2001 due to accounting fraud, it led to a significant drop in its stock but did not impact the overall market or economy enough for gold prices to rise.

There are supply-demand and unpredictable factors

Changes in gold supply and demand can make prices volatile. Increased mining boosts supply, potentially lowering prices, while reduced central bank purchases weakens demand, causing dips. These shifts create unpredictable price movements.

Additionally, sudden shifts in investor sentiment can make gold’s performance volatile. Lastly, during periods of geopolitical stability or de-escalation of conflicts, gold prices often decline, reducing its effectiveness as a hedge.

So, apparently gold can be a strong safe haven, but not always reliable in every market condition.

This emphasizes the importance of a diversified investment strategy

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Invest in Digital Gold the diversified way

The 100 Year Portfolio is low-risk and has shown to yield moderate results in the past during black swan events like Global Financial Crisis, Covid-19 pandemic and the dotcom bubble.

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Next Potential Scenarios for Gold Prices

Gold is on a wild ride, and where it heads next dictates next economic trends. Let’s break down into three possible scenarios for Gold this FY:

• Continued Rally: If central banks (especially the Fed) keep cutting interest rates aggressively, borrowing becomes cheaper, and inflation could remain stubborn. This weakens paper currencies, making gold even more attractive as a hedge.

• Correction and Consolidation: Gold’s meteoric rise might take a breather if inflation starts cooling off faster than expected. If central banks slow down or pause their rate cuts, the urgency to hedge against inflation could fade.

• Sharp Decline: This is the least likely scenario, but it’s worth considering. If the global economy stabilizes and riskier assets (like tech stocks or even crypto) start offering better returns, investors might shift their money away from gold.

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Still reading? We want to keep you hooked for longer!

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Investor’s Guide to Gold in FY2026

With the new financial year around the corner, having read this newsletter thus far and the gold prices soaring, your big question remains -

How do I make the most of this trend?

• Diversify Based on Market Conditions
  Diversification should be flexible. Gold performs well not just during economic downturns but also in response to trade policy changes and terrorist events. So, investors should adjust their portfolios depending on the cause of market declines.

• Monitor Market Volatility Closely
  Financial analysts and investors track the reasons behind market volatility and that’s a good strategy. Don’t worry if you aren’t one - invest with Green Portfolio.

• Explore Other Safe-Haven Assets
  Future research should continue identifying other assets (besides gold) that can protect against specific risks. This would help improve portfolio stability and performance during financial stress.

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  If you have come this far, don’t forget to share your investment strategy this FY in the comments.

  And let us know what would you like to read next?