The Enduring Value of Gold: Why Tamil Nadu's Households Trust This Precious Metal for Wealth and Security

Bhama Devi RaviFor years, Mylapore jeweller D K Murthy would tell customers debating whether to invest in gold the story of Kuttiammal. Widowed in the 1930s, she left her village near Vellore for Chennai, seeking better prospects for her children.

What made that possible was her husband’s habit of buying gold every month, which became her safety net, funding a new life in the city.

While investors across the world seek stability amid global volatility, and gold is being rediscovered as the real global currency, the yellow metal has long been at the heart of generational wealth in Tamil Nadu, a financial cushion in times of crises and a longstanding symbol of security.Despite changing tax norms and younger investors turning to digital assets, gold continues to dominate the state’s investment psyche.According to the World Gold Council, Tamil Nadu households hold about 6,720 tonnes of gold, which is almost as much as the US national reserve and more than the sovereign holdings of Germany, Italy and Russia. Of the majority of gold held by Indians, 45% belongs to South Indian women, and TN leads this trend.“Gold has always been seen as a store of value across generations in India,” says Aruppukkottai-based jeweller M Ragu Raman.

“It offers liquidity, universal acceptance and emotional security unlike any other asset. For families, it is a symbol of security that can be pledged, exchanged or passed on.”People in Tamil Nadu have always held fast to their gold. When the Gold Control Act of 1968 came into effect, making it illegal to hold gold coins or bars, women called goldsmiths home and had each sovereign cut into two. Goldsmiths made house calls to craft gold jewellery.

“Although women weren’t part of financial decisions in most homes, many of us were bullion-literate,” says 92-year-old R Veda.In the late 1980s, when alcohol addiction was poorly understood, the TT Ranganathan Clinical Research Foundation filled that gap. A mother of three says when her son-in-law was an addict, she converted her four-strand chain (the popular rettaivadam) into two, giving half to her daughter to help her through her husband’s counselling and the financial crunch.Gold coins and jewellery were also informally sold among friends for small profits, with no receipts or paperwork. “People avoided paying short- or long-term capital gains tax on such sales, and most transactions stayed off record,” says advocate R S Raveendhren.This changed as reputable jewellers began buying back only from those with original receipts, and as India’s tax system became more streamlined. Chartered accountants started advising clients to declare gold holdings in their annual returns.

Over time gold came to be seen as a disciplined, long-term investment. “In rural areas too, savings are steadily moving from cash and land to gold,” says Raman.Jayantilal Challani, president of Gold and Diamond Traders Association, says Tamil Nadu’s long tradition of buying gold should be viewed as wealth creation rather than an investment seeking returns. He predicts a 150% rise in prices by 2028. “Gold is likely to have the status of preferred global currency by 2028,” he says.Over the past two decades, gold has compounded at 8%-10% annually in rupee terms, outperforming most fixed-income instruments, says Raman. “When prices dip, more buyers enter the market.”Investment adviser V Nagappan says gold jewellry is an important investment for the middle and lower-middle class, easy to buy in small amounts and universally accepted. “Like any asset, gold has had mixed results. Between 1980 and 2001 it was dull globally, but in India it held value due to the dollar rate.

Between 2012 and 2015, returns dipped 15%, but short-term gains have often ranged from 10 to 20%. Last year, returns were about 80%,” he says.Nagappan adds that records show gold held its purchasing power for more than four centuries. He also calls govt-issued sovereign gold bonds “a solid investment” with early investors benefitting from tax-free redemption. “The only drawback is that new issues have stopped and buyers have to turn to the secondary market through BSE or NSE,” he says.Nagappan says he finds younger investors uninterested in ornamental gold. “They prefer silver ETFs. It’s mostly senior citizens and middle-class investors wary of market volatility who continue to prefer physical gold,” he says, adding that portfolios shouldn’t hold more than 15%-20% in gold.Challani holds a different view. Pointing to the 5,000sqft showrooms which are mushrooming across Tamil Nadu, he insists retail interest in gold remains strong.While gold remains a trusted investment, many still hesitate to document purchases. For generations, transactions were informal and unbilled, but jewellers say awareness is growing. Buyers now understand that a receipt guarantees purity, ownership and resale value. Every ornament today carries a unique HUID code, making it traceable, and jewellers insist on original bills or HUID tags for exchanges.Younger buyers are comfortable with invoices, but the older generation remains wary.

“There’s already too much personal data in the public domain. Recording gold purchases makes you a target for scamsters,” says retired academic S Guru Rajan.Economists say that every seven years, there is a kind of upheaval, major or minor, which calls for realignment of investments. When countries face an economic downturn, investment in precious metals, especially gold and silver, takes off. “That’s why gold is always good to go,” says Challani.HOW MUCH GOLD CAN YOU HOLD: What the law says about gold possessionEarlier, the Gold Control Act of 1968 regulated gold ownership, but it was repealed in 1990. Currently, Instruction No 1916 issued in 1994 by the Central Board of Direct Taxes (CBDT) guides income tax officials during searches. It specifies that jewellery and ornaments up to certain limits cannot be seized, even without supporting documents:

A later CBDT circular, dated 2016, clarified that there is no upper cap on gold possession as long as the source of purchase or inheritance can be explained.Under Section 56(2) of the Income Tax Act, gold received as a gift from parents, spouses, or children is exempt from income tax. Gold received as a wedding gift is also non-taxable. However, if the value of gold received from non-relatives exceeds Rs 50,000, it becomes taxable.In 1999, the govt introduced the gold deposit scheme, followed by the gold monetisation scheme through banks to bring idle gold holdings into circulation.

Both failed as they required melting of jewels.When it comes to ancestral gold, proving ownership is often difficult since most people do not keep receipts or certificates when wealth is passed down. Declaring such holdings in income tax returns can formalise ownership, but many avoid doing so to steer clear of disclosing sources or to avoid potential tax obligation.(The writer is a Chennai-based journalist)Email your feedback with name and address to [email protected]