PM Modi advises against buying gold. What should Indian investors do?

Why does PM Modi want Indians to stop buying gold?

Simply put, PM Modi is urging Indians to stop buying gold because India cannot afford the import bill anymore, at least not right now.

The US-Iran war that escalated in early this year has disrupted global oil supply chains and pushed crude prices above $100 per barrel. India imports around 85% to 88% of its crude oil requirements in US dollars.

This alone becomes a massive forex outflow, but gold is the second-largest import item, and here's where it gets uncomfortable.

Indians imported gold worth $72 billion in the 2025-26 fiscal year, which is second in the world after China. That's not a conservative number!

The country is witnessing rising gold imports of almost 29% year-on-year just between April 2025 and February 2026 alone. During peak years, gold accounts for almost 5 to 10% of India's total imports, making it the largest contributor to the widening merchandise trade deficit.

Not to mention, India's foreign exchange reserve fell by $7.794 billion to $690,693 billion in the week ended May 1, 2026.

The rupee has been under pressure as well, where the RBI is intervening to prevent excessive depreciation. Every time there is a rise in gold prices globally, it translates into larger dollar outflows from India.

PM Modi appealing to the nation is not about making a decision for you on what to do with your savings, but about a macro balancing act at the present moment, where India is struggling with multiple external shocks at the same time.

Why are gold prices still rising anyway?

The irony is quite evident! As a gold investor, you might have already noticed it staring at you. PM Modi said not to buy gold, yet the gold prices kept on increasing.

Import duty was raised from 6% to 15%, which didn't help much. The forces driving gold prices aren't within India's borders, but global covering factors like geopolitical uncertainty, de-dollarisation, weakness of the dollar, and central bank buying gold.

According to J.P Morgan, gold will average at $5,055/oz by Q4 2024, rising towards $5,400/oz by the end of 2027.

Both domestic policy and global macro are pulling this in opposite directions. After the prime minister's speech, gold dipped a bit but then steadied. This is what builds the tension amongst people with an alarming question, i.e., "Should I sell my gold?"

So what should investors do with their gold?

After PM's appeal, many are conflating this with the proposition "gold is a bad investment". You have to understand that these two things are different.

The appeal is targeting more of the new physical gold purchases, such as jewelry, coins, bars, that are draining the country's dollar reserves.

If you are sitting on the gold ETF or SGB you bought two years ago, this appeal changes nothing for your investment strategy. Experts suggest holding it and not panic-selling.

Especially, if your allocation of gold is 1% to 5% of your total portfolio, there is no reason to exit. Understanding liquidity cycles in Indian markets can help you figure out when reallocation is genuinely warranted, as compared to just noise-driven.

Should a new investor still buy gold?

The simple answer is you can skip physical gold for now. The higher import duties at the 15%, elevated price levels, and the PM's speech that acts as a signal to suppress the demand, make this a poor entry point.

SGBs, when available, are the better route for a new gold exposure. No import impact, government-backed, and you earn interest on top of price appreciation. Digital gold and ETFs work too, though with the indirect import caveat.

However, to be honest, for a new investor with a 5 to 10 year horizon, there are better places to deploy capital.

Choosing the best smallcase in India targeting your financial goals is a much better investment approach for now, instead of investing in physical gold.

Where should you put your money instead?

Equities, that's where you should put your money instead, especially with investors with a long horizon.

Further, you can look for sectors with domestic revenue focus, such as consumer, infrastructure, and financials, that are relatively insulated from forex pressures right now.

Also, rather than choosing stocks reactively or chasing sector funds, a structured approach always works better.

This is where smallcase investment becomes an effective investment solution, where a disciplined smallcase portfolio is built on fundamental or momentum frameworks, keeping your equity exposure organised, not scattered across panic-driven selections.

A quick decision framework for investors on what to do next

You just have to ask a few questions to decide what to do next.

1. Do you currently hold gold?

If you have physical gold under 10% of your portfolio, you should hold and not react. For gold ETFs or SGB, you should hold them as these are efficient investments already.

However, if you have heavy physical gold, i.e., over 20% of portfolio, you should consider gradual reallocation into equities, smallcases over the next few months, not move all at once.

2. Are you planning a new gold purchase?

If you're considering it for investment, you should consider pausing for now, as prices and import duties are both high, with better alternatives existing right now.

In case you're buying for a wedding or cultural purpose, it is a different decision completely. If it matters to you, choose existing stock in showrooms rather than triggering fresh imports.

3. Where does your overall portfolio positioning?

This is a much more important strategy to work on where your best smallcase allocation or equity exposure is underweight relative to your goals, which deserves more attention than gold right now.

Understanding how earnings cycles drive smallcase performance can help you think through where in the market cycle you're deploying capital, a more useful exercise than agonising over one PM speech.

Conclusion

PM Modi's appeal on gold is a macro signal, not a personal finance commandment. You should consider it as a prescription for your current physical or heavy gold allocation in your portfolio, and restructure gradually over a few months or a year.

Indian investors need to navigate through this genuine external sector stress, as the forex pressure, or import bill, everything is real, where the collective effect of reduced discretionary imports matters at a global level.

However, your investment portfolio is answerable to your financial goals, not to the macros. If you've already strategically invested in gold in limited weightage, you don't need to panic, but just hold.

Rest, you can redeploy if gold investment is heavy and invest in solutions like smallcase portfolios that are ideal for a better long-term scenario. Start your investment journey today.

FAQs

1. Did PM Modi encourage Indians to sell gold?

No. He asked people to avoid buying new gold for one year. He made no statement about selling existing holdings.

2. Will gold prices fall because of Modi's appeal?

Domestic prices saw a brief correction, but global gold prices are driven by international factors such as geopolitics, central bank demand, and dollar weakness.

3. Are gold ETFs a problem?

Gold ETFs are better than physical gold for investment purposes, but they do indirectly contribute to India's import bill since AMCs hold physical gold as backing. Sovereign gold bonds (SGBs) are the cleanest form of gold exposure, with no impact on imports.

4. What's the best alternative to gold right now?

Equities with a long-term horizon, particularly through structured smallcase portfolios. For the risk-averse, RBI Floating Rate Bonds and REITs offer alternatives. The right mix depends on your risk profile and time horizon.

5. Should I hold gold in my portfolio at all?

Yes, a 5% to 10% allocation to gold serves as a portfolio insurance and inflation hedge. The PM's appeal doesn't change this fundamental logic. It is specifically about reducing new physical imports at a macroeconomically sensitive moment.