Stellar 2024 For Gold: Can The Yellow Metal Sustain Momentum In 2025?

Gold had an outstanding 2024. In 2024, gold prices climbed by 27 per cent, marking the best annual performance since 2010. Gold emerged as a standout performer in 2024, offering retail investors an excellent opportunity for portfolio diversification. “Prices rose by over 25 per cent, with gold reaching $2800 (₹80,000), fueled by geopolitical uncertainties and shifts in monetary policy. Key drivers, including monetary easing, inflation normalization, political risks, and heightened central bank investment demand, are expected to sustain their momentum into 2025,” says Renisha Chainani, head research - Augmont - Gold For All. 

Let us take a closer look at some of these factors. 

Monetary Easing 

According to a research report, Gold and Silver Outlook for 2025 by Augmont Gold For All, in response to slowing inflation and changing economic conditions, central banks around the world changed their monetary policy from tightening to easing in 2024, which ultimately was beneficial for precious metals. The FOMC lowered the federal funds and interest rates three times in 2024 and Lower borrowing costs are positive for gold as the metal doesn’t pay interest. The FOMC expects two rate cuts in 2025, implying a cautious stance toward future monetary easing. Moreover, following two years of tightening, the ECB began to ease monetary policy in 2024, in line with global trends. 

Geopolitical Uncertainty

Geopolitical risks such as the conflict in Ukraine and the situation in the Middle East persist. There are rising hazards, such as concerns about European sovereign debt and geopolitical unrest in countries such as South Korea and Syria. Gold has generally been viewed as a safe haven during difficult times. 

This global economic uncertainty, combined with the expected increase in inflation caused by potential trade wars, will have serious consequences for global financial markets, but it will most likely benefit precious metals prices, given gold's role as universal safe-haven assets and traditional inflation hedges. With Donald Trump's return as US president, there is likely to be greater uncertainty about trade and tariffs, which should strengthen the gold price

Investment Demand 

Central banks remained key players in the gold market, boosting global gold holdings by almost 745 tonnes in the first ten months of 2024. The Reserve Bank of India purchased 77 tonnes of gold, representing a fivefold increase over the same period in 2023. Gold currently accounts for 10.2 per cent of the Reserve Bank of India’s (RBI) currency reserves, up from 7.8 per cent a year earlier. 

This makes the RBI one of the top gold buyers among central banks in 2024. The Turkish Central Bank bought 72 tonnes of gold, followed by the Polish Central Bank's acquisition of 69 tonnes.. This underlines gold's significance as a strategic asset for central banks in risk management and reserve diversification. 

Should You Invest 

With the continued geopolitical, political, and macro uncertainty, gold is expected to retain its appeal as a hedge against inflation. “Investors may adopt a buy-on-dips strategy as the metal is anticipated to experience periodic oscillations. Still, the long-term view remains favourable for the next five to six months and prices are expected to touch $3000 (~Rs 85000),” says Prithviraj Kothari, Managing Director (MD), RiddiSiddhi Bullions Limited (RSBL). 

Agrees Chainani, “Retail investors can benefit from the anticipated price growth—up to $3000 for gold—by adopting a "buy on dips" strategy. Allocating 10 per cent each of their portfolio to gold can enhance risk-adjusted returns while leveraging their safe-haven appeal during global uncertainties.”