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New Delhi. In a nation whose love for gold is legendary, financial adviser Biju Daniel is one of scores of Indians who are rethinking how they amass riches through the precious metal.

Daniel’s wife owns at least a kilogram of jewelry and he sports a gold watch. But he is also shrewd enough to realize that the world’s biggest gold consumers are falling out of love with wearing their wealth, preferring to stock up on coins, bars and bullion-based investment funds as they look for returns safe from the ravages of inflation and the dictates of fashion.

“The current generation is not serious about gold. They have bangles, but they don’t wear them,” Daniel, of Shreyas Investment Services, said in his basement office, after wrapping up an offer to clients of the SBI Gold Fund as an investment. “Look at college campuses, Indian girls there are not interested in gold jewelry. My wife has about one kilo of gold jewelry, but my daughters are not interested.”

Demand for gold bars, coins and other pure investments in India, Asia’s third-largest economy, soared 83 percent in 2010 from the year earlier to 349 metric tons, according to GFMS, a precious metals consultancy that is part of Thomson Reuters.

The amount of gold used in making jewelry in 2010 rose 36 percent to 685 tons — giving investment demand 34 percent of total buying, up from 28 percent in 2009.

“Gold has come a long way from being a jewelry item to an alternative currency,” said Gnanasekar Thiagarajan, a director with Commtrendz Research. “Investment demand could surpass jewelry demand in the next two to three years,” he said.

Indians’ passion for gold dates back centuries, and the country is home to one of the world’s oldest — albeit now largely defunct — mines.

Gold, the ultimate status symbol, is also the gift of choice at celebrations, and jewelry stores across the country heave with customers in the run-up to festivals and the traditional wedding season in a country where brides are often weighed down with the wealth their parents give them.

Overall, gold buying in India jumped 38 percent in the second quarter compared with a year ago, as soaring prices simply fuelled perceptions it was a smart investment as worries about the global economy deepen. Global gold prices have risen 29 percent in 2011 and hit a record $1,920.30 per ounce on Tuesday.

India’s domestic gold prices MAUc1 have climbed 33 percent and touched a high of 28,744 rupees per 10 grams on Tuesday.

With India’s inflation nudging 10 percent and the central bank’s key lending rate at 8 percent, domestic deposits and fixed-income investments are looking especially vulnerable, and the Bombay stock market has fallen 16.5 percent this year.

World Gold Council data for the second quarter of 2011 showed Indian investment demand rose 78 percent a year before to 108.5 million tons, while jewelry demand rose 17 percent to 139.8 million tons.

In China, the biggest gold consumer after India, jewelry demand rose a comparable 16 percent in the quarter and investment demand grew by 44 percent.

Unlike jewelry, investment gold retains its value better because fabrication costs are significantly less and buyers don’t have to worry about their pieces becoming dated, making them harder to sell.

R.C. Joneja, the white-haired manager of a jewelry shop in New Delhi’s central Janpath district, says it costs about 1,000 rupees ($21) to make a 10 gram “biscuit” — a bar about the size of a credit card — while manufacturing a jewelry piece of similar weight would cost three times as much. “Customers prefer to buy these if it’s only for investment,” he said, displaying a coin and a biscuit. “But if someone wants to buy jewelry, they will definitely still buy jewelry.”

While owning physical gold may now have become harder at such high prices, Indians are snapping up “paper gold”, funds like those that financial adviser Daniel sells for a minimum monthly payment of 100 rupees.

Despite prices already higher than they have ever been, gold is still proving a worthwhile investment.

Funds that invest in gold were the top performers in August in India with gold exchange-traded funds (ETFs) garnering returns of 15.2 percent, data from tracker Lipper, a ThomsonReuters company, showed.

Reuters