Gold outperforms Sensex and Nifty with 27% returns in 2024
What's the story
Gold has been the star performer in the financial market this year, yielding almost 27% returns. The performance beats leading stock market indices including Nifty 50, Sensex and and even the S&P 500.
The spike in gold's value is due to geopolitical unrest, which has made it an attractive safe haven asset.
"A similar rally could occur in 2025 but this will largely hinge on geopolitical developments," Zain Vawda, a market analyst at MarketPulse, said.
Demand surge
Gold demand surpasses $100 billion amid geopolitical tensions
The demand for gold in the third quarter of 2024 surpassed the $100 billion mark for the first time in history.
The surge was fueled by rising geopolitical risks in the Middle East and Ukraine, along with political changes in Syria. These factors have contributed to the heightened demand for gold as a safe-haven asset.
Central banks have also been major gold buyers this year, further supporting its price.
Rate impact
US Federal Reserve's rate cuts boost gold's appeal
The US Federal Reserve's rate cuts have also made gold more appealing by lowering the opportunity cost of holding bullion.
Investors looking to hedge against inflation have flocked to gold, pushing its price higher.
Looking ahead into 2025, Jerome Powell, Chair of the Fed, has hinted that two rate cuts are likely in the coming year amid persistent inflation concerns.
Record high
Gold hits record high, forecasts remain bullish for 2025
Gold hit an all-time high of $2,788.54 per ounce on October 30 this year.
The World Gold Council (WGC) anticipates gold to trade in a similar range in 2025 if the economy behaves as expected. However, higher interest rates and lower economic growth could be risks.
Despite these potential challenges, precious metals forecasts remain bullish with UBS predicting gold to hit $2,900/oz by end-2025 and Citi, Goldman Sachs and JPMorgan targeting $3,000 by December 2025.
Market outlook
Gold's performance in Asia and India in 2025
In 2025, gold could compete with equities and real estate in Asia. Chinese demand for gold would be contingent on the country's growth rate.
However, India's gold demand seems more stable as it is less likely to be impacted by a possible tariff war President-elect Donald Trump is threatening with.