A record rally in gold prices is reshaping household behaviour by not just fuelling investment demand but also triggering a sharp rise in gold-backed borrowing as families look to unlock liquidity without selling their prized assets.

Pure gold prices in Calcutta have surged from ₹76,750 per 10 grams at the start of January 2025 to ₹1,14,650 per 10 grams by end-December 2025, and further to ₹1,55,150 per 10 grams by February 20, 2026. The upward trajectory is expected to continue amid a fresh tariff salvo from US President Donald Trump and heightened concerns over the US-Iran conflict.

As gold prices glittered to record highs, it has altered buying patterns and borrowing behaviour alike.

Data from the World Gold Council shows jewellery demand fell 12 per cent in 2025, even as investment demand jumped 73 per cent in value terms, with gold exchange-traded funds (ETFs) cornering a significant share of inflows.

At the same time, gold loans have emerged as a key channel for households seeking quick liquidity. According to CRIF High Mark, an RBI-registered credit information bureau, the gold loan portfolio outstanding expanded 41.9 per cent year-on-year as of November 2025 — more than double the 18 per cent growth recorded in overall retail loans.

The number of active gold loan accounts rose 10.3 per cent to 902.6 lakh in November 2025 from 818.3 lakh a year earlier, underscoring the broad-based uptake of secured borrowing.

Ticket sizes, too, are getting bigger. The average gold loan size increased from ₹1.2 lakh in FY25 to ₹1.5 lakh during the April–November period of FY26. Loans above ₹2.5 lakh accounted for 59.1 per cent of originations in the first eight months of FY26, up from 48.4 per cent in FY25.

Correspondingly, smaller ticket loans (≤₹2.5 lakh) declined from 51.6 per cent in November 2025 to 40.9 per cent during April–November FY26.

“Gold loans continued to demonstrate resilience, supported by favourable gold prices and steady demand for short-tenure secured credit,” said V.P. Nandakumar, CMD of Manappuram Finance.

However, despite elevated prices, outright liquidation of household gold has remained restrained. Total gold recycled in India stood at 92.7 tonnes in 2025, down 19 per cent from 114.3 tonnes in 2024 — suggesting that households prefer pledging jewellery over selling it.

Rahul Gupta, chief business officer at Ashika Stock Services, told The Telegraph that the shift reflects a broader change in mindset. "The increasing use of household gold for consumption reflects a clear shift in how Indian families view liquidity and financial flexibility. Traditionally considered a long-term store of value, gold is now being used more actively,” he said.

According to Gupta, households are pledging gold to fund large-ticket needs such as real estate down payments, weddings, education and vehicle purchases, or monetising old jewellery selectively. He attributed the trend to two factors: elevated gold prices boosting borrowing capacity and the relative ease of secured gold loans compared with tighter unsecured credit, such as microfinance or personal loans.

However, this does not necessarily signal distress. “In many instances, it reflects smarter financial behaviour — using an underutilised asset to meet time-sensitive goals while avoiding the sale of long-term investments,” Gupta said. Going ahead, he expects gold to increasingly serve as a "bridge asset" for short-term liquidity needs.

Jewellers and bullion traders echo the cautious tone. "While we are seeing some amount of recycling of existing jewellery for purchase of new jewellery, buyers have exercised caution in outright sale of gold jewellery amid prices being on an upward trajectory," said Harshad Ajmera of city-based JJ Gold House.

From a credit outlook perspective, the momentum may sustain, albeit at a moderated pace, according to Icra analysts.

“The incremental growth in gold loans witnessed in the recent past is largely driven by consumption demand. Going forward, AUM growth for NBFCs is expected to be in the range of 35–40 per cent this year, considering the elevated prices, and moderate to about 17–19 per cent in the next fiscal amid expectations of steady or range-bound gold prices,” said A.M. Karthik, senior vice-president and company group head, financial sector ratings at Icra.