In the present work, gold‐bearing carbonaceous phyllites in the Dalma volcano‐sedimentary belt (DVSB), occupying the central region of the North Singhbhum Mobile Belt in eastern India were studied to understand the nature and mode of occurrence of gold mineralization. We propose that the protolith of the carbonaceous phyllites, that is, organic‐rich black shale, was the major source of Au in the phyllite‐hosted gold mineralization reported from the DVSB. LA‐ICP‐MS analysis of pyrite in this study reveals elevated Au contents in the early‐formed sedimentary pyrite (syngenetic and diagenetic pyrite). Trace element systematics confirms the presence of invisible Au with in the sedimentary pyrite as solid solution (invisible gold). Petrographical evidences suggest a close spatial relationship of Au‐enriched pyrite and carbonaceous material. Stable carbon isotope values confirm the organic nature of the carbonaceous matter. Further, the high organic carbon content of these samples falls well within the favourable range of an auriferous carbonaceous host rock. These evidences suggest that the organic carbon played a key role in fixation of gold in the carbonaceous shales. Subsequent diagenesis resulted in the release of Au from the organic matter and its incorporation onto the coeval sedimentary pyrite. Field observations and reports by previous workers indicate that these rocks were subjected to a late‐stage metamorphic/hydrothermal event. Paragenesis of pyrite coupled with its trace element systematics reveals that this late‐stage event resulted in the formation of younger euhedral pyrite and pyrrhotite and released invisible gold from the pre‐existing sedimentary pyrite followed by its precipitation in the quartz reefs. Based on these studies, we propose a two‐stage model of gold mineralization, wherein gold was initially incorporated in black shale‐hosted sedimentary pyrite and later released and precipitated in quartz veins.