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Informist, Wednesday, Jan. 8, 2025

 

MUMBAI – Gold and silver prices on the Multi Commodity Exchange of India are likely to touch fresh record highs owing to firm demand and heightened geopolitical tensions, ICICI Direct said in the yearly commodity outlook for 2025 Wednesday. "Global volatility to keep precious metal in limelight," it said.

 

Amid firm central bank buying, safe-haven demand, and fears of a potential trade war, gold prices on the MCX are seen rising towards INR 85,000 per 10 gm, the brokerage said. It sees gold prices on COMEX rising further towards $2,900-$3,000 per ounce in 2025.

 

However, a strong dollar and a rise in US treasury yields may provide some headwinds to gold prices, the brokerage said. "Trump's proposed policies are inflationary in nature, which would limit Fed (the US Federal Reserve) from cutting rates," it said.

 

On the other hand, silver prices are seen moving towards INR 110,000 per kg on the MCX and $37-$38 per ounce on COMEX in 2025 as the market is likely to remain in deficit for the fourth year in a row, the brokerage said. "Demand in the industrial sector is likely to grow amid green economy applications, particularly photovoltaics, electrification of vehicles, investments in infrastructure such as charging stations, power grids and rapid adoption of AI (artificial intelligence) technologies."

 

Demand for silver in the industrial segment is expected to grow by 7% this year, surpassing 700 million ounces for the first time, the firm said. Moreover, investment demand may surge amid rate cuts by the major central banks, hopes for more stimulus packages from China, and elevated geopolitical tensions, supporting silver prices. "We expect silver to outperform gold in 2025 taking (the gold to silver) ratio again down below 80 level, which is standing near 89 right now." 

 

EXCHANGE-TRADED FUNDS

In 2024, there were inflows in gold exchange-traded funds for six consecutive months till October, owing to safe-haven demand amid geopolitical tensions and market uncertainties, the report said. However, outflows were witnessed in November amid a strong dollar and a rise in US treasury yields.

 

"We believe fresh investment demand may kick in (this year) as investors will buy gold as store value amid concerns over trade war," it said. Similarly, demand for silver ETFs is likely to surge in 2025 amid rate cuts across major economies, hopes for more stimulus packages from China, and elevated geopolitical tensions.

 

RECAP 2024

Both gold and silver hit multiple highs in 2024 on COMEX and the MCX. This was despite a significant correction in gold and silver prices on the domestic bourse due to the government's decision in the Union Budget for the financial year 2024-25 (Apr-Mar) to cut import duty on gold. On Jul. 23, the government announced a reduction in customs duty on gold and silver to 6%, including 5?sic customs duty, down from 10?rlier, and to 1% agriculture infrastructure and development cess, down from 5?rlier.

 

However, in October, gold prices hit an all-time high of INR 80,282 per 10 gm on the domestic bourse, giving returns of nearly 21% in 2024. On COMEX, gold gave 27% returns in 2024, hitting a record high of $2,826.3 per ounce in October.

 

In the case of silver, prices did not reach the historical high on COMEX. However, on the MCX, prices breached the INR 100,000-per-kg level. In October, prices hit a high of $35.21 per ounce and INR 100,081 per kg on COMEX and MCX, respectively. The yearly return on silver prices was 21% and 17% on the international and domestic bourses, respectively.  

 

On Tuesday, the most active February gold contract closed at $2,665.4 per ounce and INR 77,531 per 10 gm on COMEX and the MCX, respectively. The most active March silver contract closed at $30.69 per ounce on COMEX and the same month's contract on the MCX closed at INR 90,873 per kg.  End

 

US$1 = INR 85.85

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by J. Navya Sruthi

Edited by Rajeev Pai

 

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