GR Exclusive: Gold Prices In India Outperform Sensex, Nifty In 2024; Gold At Rs 1 Lakh In 2025 Possible If...

Gold prices in India have outperformed Sensex and Nifty, offering double-digit gains, said Prithviraj Kothari, Managing Director of RiddiSiddhi Bullions Limited (RSBL) in an interview with GoodReturns.In. He explained that the 2024 performance of gold reinforces its potential as a cyclical asset in times of market uncertainties and geopolitical tensions.

He is optimistic about gold in 2025. Although he believes that Trump's 2.0 could have a nuanced impact on the yellow metal, he still predicts 24K gold prices to hit Rs 85,000 per 10 grams next year, which would be a new historic high. However, when asked whether gold has the potential to hit the Rs 1,00,000 mark, he said, the possibility cannot be ruled out in 2025 in various cases. He predicts silver prices to hit the Rs 1,10,000 mark in 2025.

With 40 new record highs in 2024, gold prices in India have yielded about 25% returns year-to-date, making it the best performer in comparison to stocks and bonds. YTD, Sensex is currently up by 9%, and Nifty 50 has surged by 9.7% so far. India's 10Y Bond Yield which stood at 6.82% on December 27th, is down by 0.387% year-on-year. The 10-year yield was above 7.17% a year ago.

At present, 10 grams of gold prices in India are at Rs 78,000 in 24K, at Rs 71,500 in 22K and at Rs 58,500 in 18K.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.

Kothari expects the trend in gold to be driven by inflation indicators, interest rate decisions and economic performance in 2025.

When asked if Trump's tariff could be a drawback to gold's gaining momentum, Kothari said, that if tariffs lead to reduced economic stimulus-might weigh on gold prices. However, there are pros as well with Trump's 2.0. Kothari explained that Trump's second tenure as President also brings heightened geopolitical and economic uncertainty, which are supporting factors for gold as been the case in history as well. A strong dollar though could be a spoilsport with fewer rate cuts trajectory from the Fed in 2025.

Coming to geopolitical risks, he believes the tensions in the Middle East, risks in the Asia-Pacific region and war escalation in Russia-Ukraine to continue to drive gold prices. Giving an investment strategy, he suggested investors diversify their portfolio, and allocate 15-20% in precious metals while navigating a long-term approach.

Here are the excerpts from the interview of Prithviraj Kothari, Managing Director of RiddiSiddhi Bullions Limited (RSBL) with GoodReturns.In.

1. How has gold performed against Nifty, and Sensex in 2024?

Gold has outperformed both Nifty and Sensex in 2024, offering double-digit returns compared to the relatively muted performance of equity indices. This reinforces its role as a counter-cyclical asset during periods of market volatility.

Gold started the year 2024 on a strong note around $2070 (~Rs 63000). Then prices dipped to $2000 (~Rs 61000) in mid-February, and then there was no looking back. Gold prices touched a record high of $2800 (~Rs 80000) on the last day of October month. And now prices are hovering around $2670 (~Rs 77000) in mid-December, yielding around 25% returns to date. Gold has outperformed other asset classes like stocks and bonds in 2024.

2. Gold prices have recorded double-digit gains in 2024, do you expect the trend to continue in 2025?

While the double-digit growth in 2024 reflects the prevailing market uncertainties and geopolitical tensions, the continuation of this trend in 2025 will depend on inflation trends, interest rate decisions, and global economic stability.

3. What is your outlook on gold in 2025?

The outlook remains positive for 2025, with gold likely to benefit from persistent geopolitical risks, central bank buying, and inflationary concerns. However, the pace of growth might moderate compared to 2024.

4. How will Trump 2.0 impact gold prices? There are reports that indicate Trump's tariff could lead to fewer rate cuts from the Fed, will this impact gold prices?

Trump's potential return to the presidency, often referred to as "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 U.S. dollar. A stronger dollar typically poses a short-term challenge for gold, as it makes the metal more expensive in other currencies. Additionally, fewer rate cuts from the Federal Reserve-if tariffs lead to reduced economic stimulus-might weigh on gold prices.

However, Trump's tenure also brings heightened geopolitical and economic uncertainty, which historically supports 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.

5. Also, do you think geopolitical tensions will continue to drive gold prices?

Yes, geopolitical tensions are anticipated to continue driving gold prices. Historical patterns consistently show that periods of conflict, political instability, or international disputes heighten investor demand for gold as a safe-haven asset. Events like the Russia-Ukraine war, Middle East hostilities, or rising tensions in the Asia-Pacific region have a direct influence on gold prices, as they amplify economic uncertainty and erode confidence in traditional financial markets.

Geopolitical disruptions often lead to currency fluctuations, slower economic growth, and increased market volatility, all of which contribute to gold's appeal. Central banks also tend to increase gold reserves during such times, further supporting prices.

In the current global climate, where tensions remain high across various regions, gold is likely to maintain its critical role as a hedge against geopolitical risks, making it an essential component of diversified investment strategies.

6. What is your investment strategy in gold and silver prices?

Diversify your portfolio with gold and silver, allocate 15-20% to precious metals, and adopt a long-term perspective to navigate volatility while securing steady growth. A balanced approach involving physical gold/silver, ETFs, and digital gold/digital silver is advisable.

7. Do you think there is a probability of gold to hit the Rs 1 lakh mark in 2025? What is your target on silver next year?

While Rs 1 lakh for gold seems optimistic, it cannot be ruled out in extreme scenarios of economic stress. However, I think there is a high probability of gold touching the $3000 (Rs 85000/10 gm) target in 2025. For silver, targets above Rs 110,000 per kg are achievable, driven by industrial and investment demand.

8. Physical gold, gold ETF or sovereign gold bonds, which is a better investment for next year?

Each option caters to different investor preferences and financial goals. Physical gold is ideal for traditional investors who value tangibility, but it comes with storage and security concerns. Gold ETFs offer liquidity, ease of trading on stock exchanges, and no storage worries, though they incur minimal expense ratios. Sovereign gold bonds (SGBs), issued by the government, stand out for their 2.5% annual interest and tax benefits on maturity, but they have a lock-in period of five years, limiting short-term liquidity.

Investors should choose based on their horizon and objectives: physical gold for long-term wealth preservation, ETFs for flexibility, and SGBs for higher returns and safety. Diversifying across these options can also balance risks and rewards effectively.

9. Any recommendations or tips for investors in 2025?

Diversify your portfolio with gold and silver, allocate 15-20% to precious metals, and adopt a long-term perspective to navigate volatility while securing steady growth. For instance, during the 2008 financial crisis, portfolios with a 10% allocation to gold experienced reduced losses compared to those without. Similarly, in 2020, gold's surge amidst the pandemic offset declines in equity markets, showcasing its stabilizing effect.

These scenarios underline the effectiveness of including precious metals in achieving balanced and resilient investment portfolios.