Gold is gaining renewed trust and investor confidence as an asset class, amid weakening global governance and turbulence in rules-based financial systems (Sethi, 2025). The ongoing political and economic uncertainty, largely driven by the United States (BBC News, 2025), has pushed gold prices to record highs, surpassing $130 per gram (Gold Avenue, n.d.).
Gold is an enigmatic metal and an economic paradox – it is simultaneously an asset class, store of value, and medium of exchange. For centuries, it has played multiple roles in global economic history – serving as a monetary standard under the gold standard, anchoring the global financial system at Bretton Woods in 1945, and acting as a reserve against national currencies until the gold standard was finally abandoned in 1971 (Office of the Historian, n.d.). Since then, the US dollar has emerged as the world’s reserve currency, not mandated by any global monetary order, but rather by trust, certainty, and faith in the American economic system. However, this faith may now be shifting.
Every problem creates a new opportunity. Could the current surge in gold prices help address the climate finance gap?
Bridging the climate finance gap
Climate finance, or the lack thereof, lies at the heart of several global and national discussions (CFR, 2024), from COP negotiations to debates on reforming international financial architecture. National discourses have focused on assessing technology and financing needs to meet Nationally Determined Contributions by 2030, and on evaluating green finance gaps to fund India’s net zero ambition by 2070. These discussions centre on mobilising greater green investments and financing.
A range of estimates has been proposed for India to achieve net zero by 2070, from $160 billion to $288 billion per annum (Raj, & Mohan, 2025). This financing will be required to transition India to clean energy and clean mobility, enable industrial decarbonisation, and reduce emissions from agriculture and land use, among others. The Reserve Bank of India (RBI) has indicated that India needs to increase investments by an additional 2.5% of gross domestic product (GDP) by 2030 to address the infrastructure gap caused by climate events (PTI, 2023).
Increasing the investment rate and directing it towards climate mitigation and adaptation cannot be a natural economic process in India. It is not possible through the usual financial intermediation through banks and capital markets. It requires structural measures, such as directed lending, dedicated green institutions, greening public expenditure, as well as enabling foreign finance.
The need for innovative financing
While most mitigation investments, including clean energy, battery storage, and green hydrogen, are expected to undergo market and technology maturity cycles, private investments are likely to occur over time as binding constraints are relaxed. In contrast, most adaptation investment is directed towards coping with the adverse impacts of climate change, including acute events such as heatwaves, precipitation, and coastal cyclones, which are increasing in both frequency and severity. Climate adaptations, such as flood protection systems and heat and cyclone shelters, must be financed through public investments. However, there is also a public investment constraint, which requires a novel solution that can help channel India’s savings into climate sectors.
While India remains a high savings economy, the stagnating gross fixed capital formation (GFCF) reflects weak financial intermediation systems. Financial savings have stagnated at around 18% share of Gross Domestic Product (GDP), indicating that a significant share of household wealth remains locked in non-financial assets, such as gold and real estate.
Gold monetisation can unlock a massive volume of capital
Monetising gold can be a useful instrument to fund climate actions, particularly climate adaptation, which is a priority for India. But how much gold does India hold?
The RBI has official reserves of about 900 tonnes of gold (Dubey, 2025). Estimates suggest that Indian families have a total gold stock of around 28,000 tonnes (WeekendInvesting, n.d.), valued at about $3.6 trillion at current prices. This is a large and idle store of value, and a small part of it could be unlocked and used to finance or mobilise low-carbon investments, address the adverse effects of climate change, and build resilience through subsidies, incentives, and public investments in climate adaptation.
While a Gold Deposit Scheme was launched in 2015, it underperformed (Economic Times, 2015, April 27), and only a small portion of India’s gold stock was monetised. Managed by commercial banks, the scheme faced high transaction costs and limited liquidity and income for banks. Although the 2015 scheme was discontinued, it may be time to revisit a similar gold monetisation approach to financialise a small share of India’s $3.6 trillion in gold assets, which is even higher than the total capital stock of institutional investors in India. Pensions, insurance, and mutual funds in India collectively amount to about $2 trillion (Source: Multiple).
The new green gold deposit scheme could be managed either directly by the government, central bank, or a dedicated apex financial institution that would receive the physical gold (not jewellery) and provide a gold certificate of deposit (GCD), assuring the holder the return of physical gold or equivalent proceeds after a set period, with an interest rate similar to that of gold bonds. While gold bonds are purely financial instruments, such a deposit scheme would help convert idle physical gold into productive capital that can support public finance and climate investments in the short term.
There may be institutional and structural challenges to the monetisation of gold, but these challenges can be addressed through appropriate measures. With thoughtful design, transparency, and strong institutional backing, gold monetisation can align India’s cultural affinity for gold with the country’s green transition, transforming a centuries-old store of wealth into a catalyst for sustainable growth.
The blog is authored by Dhruba Purkayastha, Sustainable Finance Expert, and Labanya Prakash Jena, Director at Climate and Sustainability Initiative (CSI). The views expressed here are the authors’ alone.
References
BBC News. (2025, September 2). Gold price hits record high as investors seek safety. BBC News. https://www.bbc.com/news/articles/ceqyq7r8703o
Council on Foreign Relations (CFR). (2024, October 23). Understanding the global push for climate finance. CFR Backgrounder. https://www.cfr.org/backgrounder/understanding-global-push-climate-finance
Dubey, N. (2025, October 23). RBI adds more gold to forex reserves, holdings reach 880.18 tonnes. Angel One. https://www.angelone.in/news/economy/rbi-adds-more-gold-to-forex-reserves-holdings-reach-880-18-tonnes
Economic Times. (2015, April 27). Gold monetisation scheme fails to appease consumers over low returns and security concerns. The Economic Times. https://m.economictimes.com/wealth/earn/gold-monetisation-scheme-fails-to-appease-consumers-over-low-returns-and-security-concerns/articleshow/47412676.cms
Gold Avenue. (n.d.). Gold price today in USD – Track live spot & market insights. https://www.goldavenue.com/en/gold-price/usd
Office of the Historian. (n.d.). Nixon and the end of the Bretton Woods system, 1971–1973. Milestones in U.S. Foreign Relations. United States Department of State. https://history.state.gov/milestones/1969-1976/nixon-shock
PTI. (2023, May 3). India needs to invest 2.5% of GDP till 2030 in green finance, says RBI report. The Economic Times – BFSI. https://bfsi.economictimes.indiatimes.com/news/policy/india-needs-to-invest-2-5-of-gdp-till-2030-in-green-finance-says-rbi-report/99996109
Raj, J., & Mohan, R. (2025). India’s climate finance requirements: An assessment. Centre for Social and Economic Progress. https://csep.org/working-paper/indias-climate-finance-requirements-an-assessment/
Sethi, V. (2025, April 22). Gold price hits ₹1 lakh mark: Here are 5 key reasons behind the rally in yellow metal. LiveMint. https://www.livemint.com/market/commodities/gold-price-hits-1-lakh-mark-here-are-5-key-reasons-behind-the-rally-in-yellow-metal-11745306604354.html
WeekendInvesting. (n.d.). India’s hidden wealth: The power of gold in Indian households. https://weekendinvesting.com/indias-hidden-wealth-the-power-of-gold-in-indian-households/
