Gold continued to shine at the onset of the new year, building on its impressive performance in 2024. After delivering over 20 percent return in the domestic market in 2024, gold prices witnessed buying interest last week and ended around 0.74 percent higher in the international market. The gold futures contract on the Multi Commodity Exchange (MCX) for February 2025 finished at ₹77,320 per 10 gm, whereas the spot gold price ended at $2,639.49 per troy ounce on Friday.
Speaking on the triggers that fuelled gold prices last week, Sugandha Sachdeva of SS WealthStreet said, "The recent surge in gold prices has been primarily driven by its appeal as a safe-haven asset amid escalating geopolitical tensions in the Middle East and growing global economic uncertainties. These concerns are heightened as markets anticipate potential policy shifts under President-elect Donald Trump, who is set to take office on January 20. Expectations of significant economic changes under the new administration, including the possibility of trade disputes, have reignited fears, adding to gold's demand."
"Central banks have actively increased their gold holdings, further supporting the bullish sentiment. According to the World Gold Council, central banks purchased around 740 tonnes of gold in the first 10 months of 2024 as a hedge against uncertainties and a strategy for reserve diversification," said Sugandha Sachdeva. "However, gold's upward momentum has been tempered by a strengthening US dollar. The dollar index surged for the 6th consecutive week. A stronger dollar, now at a two-year high, makes gold more expensive for holders of other currencies, effectively capping its gains."
Regarding how Donald Trump's re-election as the US president would impact the gold price movement in 2025, Prithviraj Kothari, president of India Bullion and Jewellers Association (IBJA), said, "Trump 2.0 could have nuanced impacts on gold prices. His administration's policies, including tariffs and a strong preference for protectionist trade measures, could bolster the US dollar. A stronger dollar typically poses a short-term challenge for gold, making the metal more expensive in other currencies."
He added, "Donald Trump's tenure also brings heightened geopolitical and economic uncertainty, historically supporting gold demand. Trade tensions, potential conflicts, and unpredictable policies under his leadership might drive investors toward gold as a safe-haven asset. Thus, while a stronger dollar might pose headwinds, the overarching climate of uncertainty could offset these effects, maintaining gold's appeal. The net impact will largely depend on the balance between these competing factors."
On primary triggers that may dominate gold prices in the near term, Sugandha Sachdeva said, "The US Federal Open Market Committee FOMC meeting minutes, non-farm employment change, and the U.S. unemployment rate scheduled next week will likely lead to significant volatility in gold prices globally."
Asked about the gold price outlook in the near term, Sugandha Sachdeva said, “We don't foresee significant strength in gold in the near term unless prices in the international market can sustain above the $2,665 per ounce mark."
Sachdeva added, "Gold in the domestic markets can stretch its gaining streak for the third straight week if it convincingly surpasses the ₹78,000 per 10 gm mark. Otherwise, prices will likely witness supply pressure at higher levels and succumb to profit booking.”
(By arrangement with livemint.com)