Gold in household portfolios during a pandemic: Evidence from India

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 an extensive household survey in 142 districts across 21 states in India conducted during the 2020–2021 financial year. We find that the portfolio allocation of households in districts with a higher incidence of COVID-19 shifted towards gold 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 most adverse economic impact—as measured by lower night-time lights intensity—during the pandemic. Households in districts with greater banking access and better health infrastructure show a smaller shift towards gold. A panel estimation with normal and COVID-19 period surveys confirms the baseline results. Our findings contribute to a better understanding of the role of economic crisis in shaping the financial decisions of households.