'If stock markets don't rebound...': Fund manager warns gold boom could hurt India's economy

Hedge fund manager Akshat Shrivastava has issued a warning about the rising trend of wealth moving from stocks to gold jewellery in India, highlighting potential long-term economic consequences. He pointed out that nearly 70% of India's gold is held in the form of jewellery, which he believes poses significant challenges for the country's economy and the government's fiscal health.

"The interesting thing about jewellery is that it doesn't get 'traded'. In most cases when people sell their jewellery, it is out of desperation. Not as a 'flip'," Shrivastava explained in a post on X. He noted that, unlike stocks, jewellery is a largely illiquid asset, meaning the government misses out on potential tax revenues, such as capital gains and securities transaction tax (STT), when it is bought and sold. 

"When people don't flip, the government doesn't make money on that asset," Shrivastava added. "And, this is a problem."

Gold prices reached a lifetime high of Rs 1.20 lakh per 10 grams in the national capital on Tuesday. Gold prices have risen by Rs 41,050, or 52%, in the current calendar year, from Rs 78,950 per 10 grams on December 31, 2024. Silver also hit a new high, climbing by Rs 500 to Rs 1,50,500 per kilogram on Tuesday, marking a 67.78% increase from Rs 89,700 per kg at the beginning of the year.

The surge in gold and silver prices is part of a broader trend driven by factors such as a weakening dollar and expectations of further rate cuts by the US Federal Reserve. 

Shrivastava warned that the sharp rise in gold prices is contributing to an outflow of money from stocks into jewellery, as many Indians begin to view gold as a safer investment. "The money moves from a liquid asset like 'a stock' to an illiquid asset like a gold jewellery," Shrivastava said. "Government becomes a net loser."

India's stock market has underperformed in the last year. BSE Sensex reached an all-time high of approximately 85,978 points in September 2024 but fell to around 80,267 points by the end of September 2025. 

"As Gold prices continue to soar, a ton of new money is seeing an outflow from 'Stocks' to 'jewellery',” Shrivastava explained. "Worst: gold has outperformed NIFTY-50 in the last 5 years. And now people are wondering: what's the point of putting money in stocks?"

Shrivastava's concerns are relevant given the increasing participation of new investors in the stock market since 2020. He warned that if the stock market doesn't start performing soon, many of these new investors will shift to gold. "If the Indian stock markets don't start performing soon, new guys who jumped onto the stock market train post-2020, will become gold bugs," he said.