Gold, a safe-haven bet, is likely to continue its record-smashing journey in the New Year, rising to Rs 85,000 per 10 grams and even Rs 90,000 level in domestic markets if geopolitical tensions and global economic uncertainties continue.
Also aiding the run is a dovish tilt in monetary policy and buying by central banks, but if the geopolitical crisis eases, the precious metal will turn weak on depreciating rupee.
Gold price is hovering at Rs 79,350 per 10 grams in spot markets at present, and Rs 76,600 per 10 grams in futures trade on the Multi Commodity Exchange (MCX).
The precious metal capped off 2024 on a strong note with its best performance, notching 23 per cent returns in the domestic markets. The yellow metal hit an all-time high of Rs 82,400 per 10 grams on October 30 this year. Silver mirrored this stellar performance with a 30 per cent gain, surpassing the Rs 1 lakh level per kg level.
Globally, Comex gold futures started the year at around USD 2,062 per ounce and rallied to a peak of USD 2,790 per ounce on October 31, giving returns of up to 28 per cent, reinforcing their appeal amid global uncertainties.
Experts believe that precious metals remain strong performers in 2025 as well, buoyed by geopolitical tensions, central bank purchases, and a pivot towards lower interest rates by major central banks.
The outlook for gold in 2025 remains positive, though the pace of growth may moderate compared to 2024, LKP Securities VP Research Analyst - Commodity and Currency, Jateen Trivedi told PTI.
"Domestic gold prices are expected to reach Rs 85,000 as modest targets, with a best-case scenario of Rs 90,000 and silver expected to deliver bit higher gains towards Rs 1.1 lakh on modest and even hit Rs 1.25 lakh, if geopolitical tensions persist or escalate," he said.
He noted that interest rate cycles are also pivotal as a global shift toward lower interest rates would inject liquidity into markets and weaken the US Dollar, bolstering gold prices.
However, the US Federal Reserve's cautious approach to rate cuts may temper the pace of price increases. Additionally, sustained gold purchases by central banks, driven by diversification strategies and concerns over currency stability will provide strong support to bullion, Trivedi added.
Several factors have shaped the demand demand and supply dynamics of gold in 2024, including a turbulent geopolitical landscape. The ongoing Russia-Ukraine war and tensions in West Asia have spurred safe-haven demand for bullion, thus impacting its prices this year.
"Gold and silver markets have been directly impacted by a turbulent geopolitical environment. These geopolitical crises have typically caused an immediate 2-3 per cent spike in prices, reaffirming investors' preference for precious metals as a shield against uncertainty," Trivedi said.
However, Commtrendz Research co-founder and CEO Gnanasekar Thiagarajan told PTI that gold prices are struggling to keep up the momentum as the geopolitical uncertainty and economic uncertainty premium have started fading away. "Market participants are now taking into consideration US President-elect Donald Trump's tariff era, economic policies and their potential future impact on the Fed's mandate to bring inflation down to 2 per cent. Higher inflationary expectations could undermine the appeal for bullion."Furthermore, we would not be surprised to see the Fed opt for a cut from May onwards, as it could allow for a clearer picture to be formed on the new administration's actual economic policies rather than comments made potentially to gain negotiation leverage with foreign counterparts," he stated.
The outlook is bearish for gold in the first half of 2025, with the possibility of testing USD 2,455 (MCX: 73,000-73,500), he said.
The rupee is expected to depreciate further, which could arrest the fall in local prices relative to international prices in the coming year, he added.
In the domestic markets, the government's decision in July this year to cut gold import duty by 6 per cent led to a sharp 7 per cent correction in gold prices, equivalent to Rs 5,000 per 10 grams.
The price drop spurred physical demand for gold during the festive and wedding seasons. The reduction not only made gold more affordable but also boosted increased buying, supporting robust consumption by the jewellers and consumers.
"Gold jewellery consumption grew by 17 per cent in 2024, primarily driven by volatility in gold prices, along with festive and marriage-related demand. Additionally, the sharp 900 basis points reduction in import duty announced in the Union Budget of July 2024 spurred demand for jewellery, bars, and coins," Rahul Kalantri, Vice President of Commodities at Mehta Equities Ltd, said.
