'One price shock...': India’s $2 trn gold hoard is a ticking bomb, warns hedge fund manager

India’s obsession with gold, long viewed as a symbol of security and wealth, may be laying the groundwork for a financial crisis.

That’s the warning from Aittreya CA, a gold hedge fund manager, who argues that India’s $2 trillion gold stockpile—mostly held by households and small jewelers—is dangerously exposed to a price shock that could upend the economy.

“For 25 years, Indian households have trusted gold more than banks, bonds, or governments,” Aittreya wrote in a widely discussed LinkedIn post. “Yet, the very system that regulates currencies and credit refuses to manage gold price risk.”

He points to over 25,000 tonnes of gold held in India—largely unhedged—and warns that even a moderate correction could spark widespread losses. “Jewelers carry unhedged inventories worth crores,” he noted, adding that over 80% of gold retailers, particularly small and medium enterprises, remain vulnerable to price volatility.

The risk extends beyond business. Millions of Indians rely on gold-backed loans to cover emergencies and working capital. If prices dip sharply, their collateral is often auctioned—leaving them worse off. 

“Gold loan borrowers face auction risk when prices fall,” Aittreya said. “Citizens bear the ultimate risk—with zero protection.”

Banks, he argues, are missing a major opportunity both in risk management and revenue. “Banks lose ₹10,000+ crore in annual fee income potential” by not offering structured gold hedging products or participating in gold leasing markets. Currently, Indian regulations prohibit banks from actively managing gold price risk, limiting the development of a formal ecosystem.

 

While schemes like Gold Monetization and Sovereign Gold Bonds exist, Aittreya says they are no substitutes for real-time risk controls. He commended the Reserve Bank of India’s recent move to allow broader hedging through international markets and over-the-counter derivatives but cautioned that these tools primarily benefit large institutional players, not everyday consumers or small jewelers.

In the absence of a domestic derivatives or leasing market, India’s entire gold ecosystem remains “exposed to global price swings,” Aittreya warned. Without serious reform, he said, “One price shock can turn [India’s gold] into a national crisis.”