Will gold, which delivered better returns than India’s heartbeat indices Sensex and Nifty in 2024, continue its momentum in 2025 as well and what is the target for yellow metal?
Gold witnessed an impressive rally in 2024, gaining more than 20% on the COMEX by September. This surge follows a period of pandemic-driven economic uncertainty and is driven by several key factors, primarily central bank policies and geopolitical tensions. Additionally, a range of other dynamics, such as supply-demand imbalances and domestic market conditions, have influenced the price movements of these metals. At times in 2024, safe-haven and riskier assets moved in tandem. However, despite sharp volatility, the former outperformed. Gold and silver prices saw significant gains through October 2024, fuelled by the escalation of war, higher expectations of rate cuts, and overall demand.
However, following that, volatility in the Dollar Index, the possibility of a de-escalation in Middle Eastern tensions, and the victory of US President-elect Trump weighed on prices, easing the gains from the highs. Historically, safe-haven assets have taken a hit after a Republican leader assumes the US presidency, at least in the initial few months. This tug-of-war and volatility in both riskier and safe-haven assets could continue into 2025 as well.
Donald Trump will be taking over as the US President so what does that mean for the commodities market given his protectionist tendencies?
President-elect Donald Trump has made several promises that could increase market volatility. He has proposed extending tax cuts and levying tariffs on China and other nations with the objective of “making America great again.” These moves could support the dollar at lower levels. However, despite having a majority in the Senate, it will be crucial to see how President-elect Trump addresses key economic challenges, such as rising debt, monetary and fiscal policies, Middle East tensions, and other issues, while implementing his agenda.
The first quarter of 2025 could be slightly lackluster for major commodities, but the second half of the year could bring some positive momentum, helping to drive these recoveries.
China will remain an important factor in the way the world consumes commodities so where do you see the action most — oil, base metals or bullion?
China has disappointed market expectations in 2024, though it is noteworthy that People’s Bank of China (PBoC) officials have been making frequent appearances and announcing measures to support the economy. These measures include several stimulus initiatives, rate cuts, and other actions aimed at boosting the economy and supporting affected sectors. While these measures have not yet been reflected in economic data, any significant recovery could lead to a sharp rebound in industrial metals, including silver. This, in turn, could also boost demand for crude oil, supporting prices. Budget is nearly a month away so what are your expectations from the government for the sector?
In the previous budget, customs duty of both gold and silver were reduced by 9% to 6% (including 1% AID cess). There are no major expectations in this budget that could have an impact on the commodities segment. We are seeing a lot of regulatory action in the equity markets so what are your expectations from the Sebi in the new year?
In the recent announcement, Securities and Exchange Board of India (SEBI) has mandated that only one weekly option contract per exchange will be allowed starting November 20, 2024, hence there are expectations that domestic commodities exchanges could also launch a weekly options expiry.
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