Gold in household portfolios during a pandemic: evidence from an emerging economy

Abstract

This paper examines how Indian households allocate their savings portfolio across gold, financial assets, and cash during the COVID-19 crisis. Our study relies on a nationally representative household survey conducted in 2020-2021 for 142 districts in India. We find that the portfolio allocation of households in districts with a higher incidence of COVID-19 shifted towards gold—a safe asset—during the pandemic compared to households in other districts. The shift towards gold is accompanied by a shift away from financial assets and other assets (primarily cash). A similar shift towards gold is observed for districts that experienced the largest ad- verse economic impact—captured by lower night-time lights intensity—during the pandemic. Households in districts with greater banking access and better health in- frastructure show a smaller shift towards gold. A panel estimation with normal and COVID-19 period surveys confirm the baseline results. Our findings contribute to a better understanding of the role of economic crisis in shaping the financial decisions of households.