In comparison, in the developed world, gold has always been an investment instrument.
As the Reserve Bank of India's ( RBI) committee on gold chaired by UB Rao points out, "The ornamental or jewellery forms of gold are relatively of lower caratage. Those who held gold for investment purposes were holding gold with higher caratage."
Besides the ornamental value, investment consultant Gul Tekchandani gives a more practical answer for high consumption even amid urban investors.
"With high inflation and falling rupee, gold has been a good hedge, especially for high net worth individuals ( HNIs) with incomes of over $1 million (Rs 5.4 crore). But inflation has started falling and, rupee is up from 58 levels to 53-54 levels, so it makes little sense now."
According to Tekchandani, most investors were aggressive with gold because it has given great returns in the past nine years.
Since 2000, Indian gold has returned almost 16 per cent, whereas the Sensex has returned 11 per cent.
Over 20 and 30 years, the situation is the reverse.
"But it barely gave 10 per cent last calendar year, whereas both equity and bank deposits have done relatively well," he adds.