Gold and silver have experienced a notable surge of 30% over the past year, largely driven by global uncertainties, including the US election. Gold, traditionally viewed as a safe-haven asset, saw an initial boost following the election of Donald Trump, although it has recently experienced a price correction over the past month. Analysts predict that while gold may remain relatively stable in 2025, silver could continue its upward trajectory.
The surge in silver prices is attributed to its diverse industrial applications, which span across sectors like electronics, solar panels, healthcare, and electric vehicles. These sectors are expected to maintain high demand for silver in the coming year. Furthermore, persistent supply-side challenges are pushing prices higher, a trend expected to continue, keeping silver buoyant in the market.
A critical factor in commodity price movements is the US Dollar Index (DXY). Analysts suggest that a decline in the DXY could stimulate a rally in both gold and silver. Deepak Ramaraju, Senior Fund Manager at Shriram AMC, highlights that while gold may remain rangebound in 2025, silver is poised to benefit from its increasing industrial demand and ongoing supply issues.
In addition to market dynamics, central bank policies and geopolitical tensions are playing a significant role in shaping the outlook for precious metals. The Federal Reserve’s recent decision to cut interest rates by 50 basis points aims to stimulate economic growth amid easing inflation. While job growth remains soft, positive GDP figures suggest a stable economy, although future rate cuts are expected to be more cautious.
Geopolitical risks, particularly in the Middle East, have also bolstered demand for gold and silver as safe-haven assets. The ongoing conflict between Israel and Hamas, along with potential ceasefire talks, adds further complexity to the market.
Central banks worldwide have been net buyers of gold for over a decade, and this trend continued into 2024, with more than 500 tonnes purchased. This reflects a strategy to diversify reserves amid global economic uncertainty. The resurgence of gold exchange-traded funds (ETFs) indicates a renewed interest in gold as a safe-haven investment.
In India, the demand for gold and silver has surged, particularly with the reduction in import duties. The government’s move to lower duties on these metals has further spurred demand, particularly during the festive and wedding seasons. As a result, imports have surged, with India importing over 700 tonnes of gold and 6,000 tonnes of silver this year alone.
The performance of gold in both domestic markets and on the COMEX has varied. Factors like the 9% drop in import duties and a 2% depreciation of the rupee have contributed to this divergence. Despite this, analysts remain optimistic about the continued strength of gold and silver.
Manav Modi, commodity analyst at Motilal Oswal, suggests that while there may be some market consolidation or short-term dips, the overall outlook for both metals remains positive. The loose monetary policy and ongoing geopolitical risks should continue to provide a favorable environment for gold and silver prices. Moreover, ongoing central bank support for economies and the persistent demand for safe-haven assets suggest that upward momentum for these precious metals could persist.
Looking ahead to 2025, analysts at Motilal Oswal Wealth Management are optimistic about gold and silver, particularly silver, which may benefit from continued industrial demand. The ongoing geopolitical risks and central bank actions will likely continue to support metal prices. For investors, a “buy-on-dips” strategy may be prudent as the market remains favorable for precious metals.
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