Gold prices in India have skyrocketed by nearly 22%, outperforming benchmarks like Sensex and Nifty despite the latest volatility in December month due to the Fed's hawkish tone for 2025. 24K gold prices in India have skyrocketed by Rs 13,860 from Christmas last year to the latest one. Currently, the 10-gram gold price is at Rs 77,350 in 24K. Among many key driving factors for gold in 2025 would be a policy repo rate cut from RBI, which the market predicts to begin for the first time in 2 years from the February 2025 bi-monthly policy. However, earlier in December, while keeping repo rates unchanged for the 11th time in a row, RBI trimmed the cash reserve ratio (CRR) sharply by 50 bps. CRR cut is expected to support yellow metal ahead.
Gold Prices In India:
On December 24, a day before Christmas 2024, gold prices dropped by Rs 8 to Rs 1,000 across carats. Currently, 24K gold prices in India are at Rs 77,350 in 10 grams, while 22K gold and 18K gold price are at Rs 70,990 and Rs 58,010 respectively.
Broadly, gold prices are down by 1% in December 2024 so far. The latest drop is still slower than compared to a decline of 3.2% witnessed in November 2024, as Donald Trump's second victory in the White House fuelled massive demand for the dollar index which made non-yielding assets like gold less preferable.
However, December would be the second consecutive monthly drop. In October and September 2024, gold prices were up by 6% each, following a 4% surge in August. Gold was down by 3.4% and 0.4% in July and June.
Nonetheless, gold has performed resiliently in 1-year. Last year, on December 25, the price of 24K gold was at Rs 63,490. From this level, gold has skyrocketed by a whopping 21.83% or Rs 13,860 in 24K of 10 grams as of December 24, 2024.
Cash Reserve Ratio (CRR) Cut:
On December 6, RBI decided to reduce the cash reserve ratio (CRR) of all banks by 50 bps in two equal tranches of 25 bps each to 4.0 per cent of net demand and time liabilities (NDTL), with effect from the fortnight beginning December 14, 2024, and December 28, 2024, respectively.
The latest cut brings CRR to 4% of NDTL, which was prevailing before the commencement of the policy tightening cycle in April 2022. This reduction in the CRR would release primary liquidity of about Rs 1.16 lakh crore to the banking system.
CRR Cut Impact On Gold:
Prithviraj Kothari, Managing Director of RiddiSiddhi Bullions Limited (RSBL) said, to soften monetary conditions, increase liquidity, and promote economic growth, the central bank reduced the cash reserve ratio by 50% to 4%, the first decrease since 2020, while maintaining the key repo rate at 6.5% as anticipated. A stronger dollar overall and freshly released information showing the Indian economy is weakening have put pressure on the rupee.
He added that there won't be much of a direct effect on gold prices from the RBI's recent decision to reduce the CRR by 50 basis points. Non-interest-bearing assets like gold may become more appealing when interest rates are lower than other investment options like bonds and fixed deposits. This could indirectly support gold prices.
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