 "2025: Gold likely to hit Rs 85,000 per 10 grams, silver Rs 1,10,000 per kg")
The price of gold is expected to rise toward Rs 85,000 per 10 grams in 2025 due to increased central bank buying, persistent geopolitical tensions, and concerns over trade wars, said a report by ICICI Direct. Analysts believe that as economic uncertainties linger, gold's status as a safe-haven asset will attract more investment.
Gold prices rallied sharply in 2024 and hit all time high of $2790 as US Federal Reserve reduced rates by 100bps. Additionally, prices remained firm due to central bank buying, uncertainty surrounding US Presidential election and
escalating geopolitical tensions.
Internationally Base Metal prices ended on positive note as China unveiled slew of stimulus packages to revive economic growth. Further, monetary easing across major economies supported prices. On domestic front Rupee depreciation helped prices to gain further.
"Gold prices are likely to continue with its upward trend supported by safe haven demand amid heightened geopolitical tensions and fear over potential trade war hurting economic growth. Moreover, major central banks will continue to ease monetary policy as inflations touching near central banks targets. Geopolitical tensions in Middle East and Eastern Europe may continue to make gold valuable as hedge against uncertainties" said analysts at ICICI Direct.
Additionally, central banks are likely to continue with their buying spree, diversifying their reserves A strong dollar and rise in US treasury yields may provide some headwinds to gold prices. Trump’s proposed policies are inflationary in nature which would limit Fed form cutting rates. "Spot Gold is likely to rise further towards $2900-$3000 in coming months," noted the report.
Global central banks purchased 186 tonnes of gold in Q3CY24 which is lesser then compared to same quarter last year. Moreover, central banks have purchased 694 tonnes of gold this year so far which is in line with same period of 2022.
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China’s central bank broke the silence and re-entered the market after 6 month pause and purchased 5tonnes of gold in November taking reserves to 2269 tonnes. China remained one of the top gold buyer of 2024 with 34 tonnes.
"In 2024, we saw inflows in ETF for 6 consecutive month till October turning holdings positive as investors flocked to safe haven assets amid geopolitical tensions and market uncertainties. However, outflows were witnessed in November
amid strong dollar and rise in US treasury yields. We believe fresh investment demand may kick in 2025 as investors will buy gold as store value amid concerns over trade war. Dollar Index has already started gaining steam and is likely to
rise further as Trump policies on trade and immigration could spur inflation in US crumpling Fed’s ability to cut rates with higher magnitude. Moreover, as trade war commences uncertainty about growth could hurt market sentiments,\ supportive for dollar," said ICICI Direct in its note.
Silver
In tandem with gold, silver is likely to rally toward Rs 1,10,000 per kg. This anticipated surge is fueled by robust industrial demand stemming from renewable energy initiatives and the growing electric vehicle market. Additionally, a market deficit in silver is expected to amplify price increases.
"Silver prices are likely to move higher as market is likely to remain in deficit for fourth consecutive year. Demand in the industrial sector is likely to grow amid green economy applications particularly photovoltaics, electrification of vehicles, investments in infrastructure, such as charging stations, power grids and rapid adoption of AI technologies. Moreover, investment demand may surge amid rate cut across major economies, hopes for more stimulus packages from China and elevated geopolitical tensions. Spot Silver is likely to rise further towards $37-$38 level in coming months," said the brokerage.
Demand for Jewelry and silverware projected to rise by 5% in 2024. India been key growth contributor after cut in import duty. Whereas, Physical investments forecasted to fall in 2024 by 15%. However, in the coming year, fresh investment demand is expected to arise due to buoyant safe haven demand.
Crude Oil: Crude oil prices are anticipated to dip further, with forecasts suggesting a range between $60 and $85 per barrel. This expected decline is attributed to a market surplus and increased non-OPEC production. Geopolitical risks, particularly potential disruptions in the Strait of Hormuz, remain a concern, though they have not significantly impacted prices to date.
Base Metals
Copper: Prices for copper may see a downturn, potentially declining to Rs 690 per kg. This decrease is primarily due to weak demand from China, the world's largest consumer of copper, coupled with a surplus in refined copper supplies. Analysts caution that unless demand picks up, prices may continue to struggle.
Aluminium: Conversely, aluminium prices are projected to rise toward Rs 280 per kg. This upward trend is driven by a market deficit, lower inventory levels, and increasing demand linked to electric vehicles and infrastructure projects. As industries pivot towards sustainable practices, aluminium's role is expected to grow.