The bullion traders and investors are not alone in reaping rich benefits from the glittering gold prices and the strategy of keeping a substantial holding of the yellow metal seems to be working well for the government too.
A sharp rally of over 20% in gold prices so far this month has led to a surge of about $5 billion (over Rs 22,000 crore) in the value of gold held by RBI, which acts as a custodian of the yellow metal for the government of India.
The central bank keeps the yellow metal in the country's international reserves portfolio, where it had gold worth Rs 1,11,940 crore ($25.35 billion) at the end of last month.
The gold prices in domestic market has appreciated by 20.4% since the beginning of this month to hit a record high of Rs 28,230 per 10 grams.
The prices have also appreciated sharply by over 16% in the international market from $1,616 per ounce to $1,880 currently.
Taking into account a price rise of 20%, the value of gold held by RBI has appreciated by over Rs 22,000 crore or about $5 billion dollar so far in August.
The experts are anticipating further rise and believe that the gold prices might even touch Rs 30,000 level well before Diwali as investors are increasingly shifting funds to gold amid a free fall in equity markets.
Gold has traditionally been a preferred high-value purchase for Indians, but mostly for jewellery purposes and as a means of preserving the family wealth. However, the trend is also picking up for gold as a pure investment play.
RBI has also been increasing its exposure to gold in its international reserve portfolio in the past few years.
RBI's gold holding had seen a significant increase of about $7 billion after it purchased 200 metric tonne of gold from IMF on November 3, 2009.
Before this purchase, gold accounted for only about 3% of RBI's total international reserves, but it has now increased to nearly 8%.
The central bank is currently estimated to hold a total of 557.75 tonne of gold.
As per RBI data, its gold reserves have grown by Rs 22,376 crore ($6 billion) over the past one year, while it has gone up by Rs 11,254 crore ($2.9 billion) so far in the current calendar year 2011.
RBI figures among 10 largest central banks across the world in terms of gold holding in foreign reserves portfolio.