Indians bought more gold during Covid

Ahmedabad Households in India’s Covid-19 vulnerable districts allocated more gold to their savings portfolio during the pandemic compared to households in other districts, as per a study conducted by the Indian Institute of Management-Ahmedabad (IIM-A). The shift towards gold is accompanied by a shift away from other financial assets and cash, as per the IIMA working paper titled ‘Gold in household portfolios during a pandemic: Evidence from an emerging economy.’ The study, published on IIMA’s website on June 30, captured the variation in the intensity of the crisis using two main indicators:

Covid-19 cases per 1,000 population, and satellite-based night-time lights intensity. The survey covered 142 districts across 21 states. India is the second-largest consumer of gold (in the form of jewellery) in the world and an average Indian household invests 11 per cent of its overall holdings in the precious metal, as per the study paper. It said addressing geo-graphical inequalities in the availability of health facilities would assuage the panic among the public and could result in a reduced flight to safe assets such as gold. Furthermore, a better access to financial instruments and institutions can reduce the preference to hoard gold during times of crisis, it observed.

“We find evidence that the portfolio allocation of households in Covid-19 vulnerable districts (CVD), the top-third of districts by Covid-19 cases per 1,000 population, is tilted towards gold during the pandemic compared to households in other districts,” the paper said.

As per the study, the share of gold in household savings portfolios in the CVD districts is significantly higher by 6.9 percentage points compared to other districts, and is accompanied by a shift away from financial asset holdings by 4.1 percentage points.