Gold Prices In India Breaks 40 Record Highs In 2024, To Touch Rs 85,000 In 2025; 5 Reasons Why

Gold prices in India have performed strong in 2024 so far, with gains of more than 20% driven by heightened geopolitical risks, market volatility, surge in demand and commencement of rates cut cycle by global central banks. Gold rates in India have outperformed even Sensex and Nifty year-to-date, despite RBI keeping the repo rate unchanged for the 11th time in a row. In 2025, the outlook for gold is robust with a target price seen at Rs 85,000 per 10 grams. Prithviraj Kothari, Managing Director of RiddiSiddhi Bullions told GoodReturns.That 2025 shaping up to be a year where event risks are likely to garner headlines, and this will spook investors who in turn make long-term costly investments, with haven assets like gold being an attractive bet.

Prithviraj Kothari, Managing Director of RiddiSiddhi Bullions said, Gold has experienced a historic year in 2024, with prices surging over 25% and breaking 40 record highs. Total gold demand surpassed $100 billion for the first time in Q3, driven by its role as a hedge against rising geopolitical tensions, currency debasement, and market volatility.

On December 26, the 24K gold price was at Rs 77,730 per 10 grams, while 22K and 18k gold prices were at Rs 71,250 and Rs 58,300 per 10 grams. 24K gold crossed the Rs 81,300 mark in October 2024, which was its highest-ever price at retail stores in India. Meanwhile, spot gold touched $2790.07 an ounce, its latest all-time high in October. Similarly, MCX gold prices touched their latest record price of Rs 80,282 at the end of October as well. Gold prices corrected significantly after Donald Trump's victory in the US election in 2024, making him the 47th President of the world's largest economy.

RiddiSiddhi Bullions' MD believes five determinants have supported gold prices in 2024 and will continue to influence gold in 2025. These are:

1. Monetary Easing:

In 2024, central banks worldwide shifted from tightening to easing monetary policies in response to moderating inflation and evolving economic conditions. The FOMC reduced the federal funds and reduced the interest rates thrice in 2024. The FOMC projects two rate cuts in 2025, indicating a cautious approach to future monetary easing. The ECB began easing monetary policy in 2024 after two years of tightening, aligning with global trends. This shift aims to support economic growth amid declining inflation. The BoE's November 2024 Monetary Policy Report indicates a pivot towards easing, reflecting a global trend among central banks to support economic activity as inflation pressures subside. Meanwhile, it is anticipated that the Bank of Japan will raise rates twice in 2025.

2. Political Uncertainty:

Donald J. Trump is the projected winner of the U.S. presidential election. The results mark significant shifts in policy and economic strategies, potentially influencing global markets and geopolitics. In the space of less than two weeks, Trump has lost no time in firing off import tariff threats against China, Canada, Mexico, and all nine member countries of BRICS (a grouping which represents 45% of the world's population). In doing so, Trump is rekindling fears of global trade wars and creating global economic uncertainty.

Many of Trump's proposed policies could reignite inflation. The US government continues to run significant budget deficits, the US debt keeps growing and interest payments have skyrocketed. While the recent interest rate cuts ease this pressure somewhat, there are no signs of a reduction in government spending, so the US will probably have to inflate away the debt, which would ultimately be beneficial for gold.

3. Inflation:

Inflation, which has concerned policymakers and investors in the past few years, continues to normalize. Progress may slow, however, and the specifics will vary from country to country. In the U.S., inflation may rebound at the end of 2025 because of higher prices and labour costs resulting from new tariff and immigration policies, before it resumes its downward trend in 2026 as growth slows. In the euro area and the UK, inflation should recede steadily amid underlying growth risks.

4. Investment Demand:

Central banks continued to be significant players in the gold market, increasing global gold holdings by around 745 tonnes in the first 10 months of 2024. The Reserve Bank of India bought 77 tonnes of gold, which was a five-fold increase from the same period in 2023. Gold now represents 10.2% of the RBI's forex reserves, up from 7.8% a year ago. This made the RBI one of the largest buyers of gold among central banks in 2024. The Turkish Central Bank bought 72 tonnes of gold, followed by the Polish Central Bank, which bought 69 tonnes of gold. This reaffirms the role gold plays as a strategic asset for central banks to manage risks and diversify reserves.

Major central banks are expected to continue buying gold, although the quantities will not be as high as last year. ETF investors returned to gold in the second half of 2024 after an extended sell-off. If the Chinese government's economic stimulus measures boost the economy, China and India could provide a solid basis for gold demand in 2025.

5. Geopolitical Uncertainty:

Geopolitical risks such as the war in Ukraine and the situation in the Middle East remain. There are emerging risks like European sovereign debt concerns and geopolitical instability in regions like South Korea and Syria, Gold is traditionally seen as a safe haven in uncertain times. This global economic uncertainty coupled with the expected increase in inflation caused by probable trade wars will have serious consequences for global financial markets, but will likely be a boon for precious metals prices, given the role of gold as universal safe-haven assets and traditional inflation hedges. With the return of Donald Trump as US president, there is likely to be more uncertainty regarding trade and tariffs, which should also support the gold price.

Overall, Kothari said, "We see 2025 shaping up to be a year where event risks are likely to garner headlines. In an environment like this, it is possible that investors could be spooked and make costly long-term investment decisions. Gold can be a chameleon asset, influenced by the U.S. dollar, interest rates, and market sentiment. The next psychological level, gold could touch in 2025 is $3000 (~Rs 85000)."