Gold Is Most Likely To Continue Its Mindboggling Run In 2025 As Well

India's gems and jewellery market is expected to grow to $100 billion by 2025. The country continues to be one of the largest global hubs for the production, export, and consumption of jewellery

Gold is likely to continue its record-smashing journey in 2025 and rise up to Rs. 85,000 per 10 grams or even touch Rs. 90,000 level in the domestic market if geopolit-ical tensions and global economic uncertainties remain as volatile. Aiding the run is a dovish tilt in monetary policy.

However, if the geopolitical crisis eases, the yellow metal will turn weak on depreciat-ing rupee.

Gold price is hovering at Rs. 79,350 per 10 grams in spot markets at present, and Rs76,600 per 10 grams in futures trade on the Multi Commodity Exchange (MCX). It hit an all-time high of Rs. 82,400 per 10 grams on October 30.

Silver mirrored this stellar performance with a 30 per cent gain, surpassing the Rs. one lakh level per kg level.

Experts believe that precious metals will remain strong performers in 2025 as well, buoyed by geopolitical tensions, central bank purchases, and a pivot towards lower in-terest rates by major central banks.

Though the outlook for gold remains positive, the pace of growth may moderate com-pared to 2024, says VP Jateen Trivedi, Research Analyst (Commodity and Currency) LKP Securities.

He noted that interest rate cycles are also pivotal as a global shift toward lower inter-est 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 sup-port to bullion, Trivedi added.

Several factors have shaped the demand and supply dynamics of gold in 2024, including a turbulent geopolitical landscape.

"Gold and silver markets have been directly impacted by a turbulent geopolitical envi-ronment. 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.

Meanwhile, ommtrendz Research co-founder and CEO Gnanasekar Thiagarajan con-tended that gold prices are struggling to keep up the momentum as the geopolitical un-certainty and economic uncertainty premium have started fading away. "Market partic-ipants are now taking into consideration the ensuing Donald Trump tariff era, econom-ic policies and their potential future impact on the Fed's mandate to bring inflation down to two per cent.

"Furthermore, we would not be surprised to see the Fed opt for a cut from May on-wards, 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," Thiagarajan stated.

In the domestic markets, the government's July decision to cut gold import duty by six per cent led to a sharp seven per cent correction in gold prices, equivalent to Rs. 5,000 per 10 grams. The reduction not only made gold more affordable but also swelled buy-ing, supporting robust consumption by the jewellers and consumers.

"Gold jewellery consumption grew by 17 per cent in 2024, primarily driven by volatili-ty in gold prices, along with festive and marriage-related demand," said Rahul Kalantri, Vice-president of Commodities at Mehta Equities Ltd.

According to Srikumar Krishnamurthy, senior VP and co-group head (Corporate rat-ings) at Icra Ltd, the domestic jewellery industry, in value terms, had grown at a com-pounded annual growth rate (CAGR) of 11 per cent over the period FY 2019 to FY2024.

The global demand for precious metals has increased substantially, with major central banks, including India, continuing their gold-buying spree, with net purchases exceed-ing 500 tonnes in 2024, as it reflected a strategy to diversify their reserves amid eco-nomic uncertainties.

"Central bank buying has been a pivotal factor. Their accumulation reflects a long-term strategy to hedge against fiat currency volatility, adding upward pressure on gold pric-es," Manav Modi, analyst (Commodity research) at Motilal Oswal Financial Services Ltd, said.

In November, the country's gold imports reached a record high of $14.86 billion, regis-tering a four-fold increase, mainly on account of festival and wedding demands.

Meanwhile, Trump’s re-election has added an unexpected twist to the bullion markets. His stance towards cryptocurrency resulted in a rally in digital assets, combined with rising treasury yields, which diverted some investors away from gold.

The exchange-traded funds (ETFs) outflows also reflected this shift, adding imminent pressure on the bullion prices in the latter half of the year.

As per Angel One's DVP- Research, Non-Agri Commodities and Currencies, Prathamesh Mallya, despite these headwinds, “we expect gold to maintain its momen-tum in 2025, with double-digit returns. Gold prices in the international markets might move higher towards $3200 per ounce mark, while MCX gold prices might rally to-wards Rs. 87,000 per 10 grams in 2025.’

India added 27 tonnes of gold in October, bringing its total gold purchases to 77 tonnes from January to October, WGC data based on an International Monetary Fund (IMF) report stated.

Anindya Banerjee, Head-Currency and Commodity Research, Kotak Securities, said 2024 has been a landmark year for gold, with Comex gold surging over 40 per cent from its yearly lows to reach an all-time high of $2,801.8 per ounce in October.

Robust retail demand and central bank purchases also played a crucial role, with cen-tral banks buying over 1,000 tonnes of gold annually for the past two years, Banerjee said, adding that China emerged as the largest buyer, contributing to the strongest start to a year on record for central bank gold purchases. In tandem, hedge fund activi-ty in March added 285 tonnes to gold demand, signalling strong market confidence, he said.

Meanwhile, on consumer sentiment, All India Gem and Jewellery Domestic Council (GJC) chairman Saiyam Mehra said "The India gems and jewellery industry is set for substantial growth by 2025, driven by a combination of domestic demand, export po-tential, and strategic initiatives. India's gems and jewellery market is expected to grow to $100 billion by 2025. The country continues to be one of the largest global hubs for the production, export, and consumption of jewellery."

The sector, Mehra said, is expected to achieve a compound annual growth rate (CAGR) of five to six per cent during this period, driven by strong consumer demand, both lo-cally and globally.

"The middle class and young population (which form a significant portion of the con-sumer base) will continue to drive demand for gold and diamond jewellery. The wed-ding jewellery market will also remain a major growth driver in India," he added.

Exporters are also positive about 2025, saying the demand is expected to grow in key export markets, especially in China.

GJEPC chairman Vipul Shah points out, "The demand will be better this year, following the easing of the geopolitical scenario and growing demand in China. This is due to de-stocking and the Chinese government injecting liquidity, which will boost demand in 2025."