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The sharp rally in gold prices globally was led mostly by central bank purchases and investor buying.
Gold price outlook 2025: Gold prices that have climbed over 30 per cent so far in 2024 to Rs 7,300 per gram in the Indian markets (up 28 per cent in dollar terms till November-end), are set for their best calendar year performance in 10 years, suggests a recent report by World Gold Council (WGC).
However, this stellar run, analysts believe, may not carry through till the end of 2025 in the backdrop of economic and geopolitical headwinds.
The sharp rally in gold prices globally in 2024, the WGC report said, was led mostly by central bank purchases and investor buying, which more than offset a notable deceleration in consumer demand.
Central bank demand remained robust, with gold buying reaching 694 tonnes by Q3 of CY24 compared to levels seen in 2022, according to WGC data.
Gold vs other asset classes in 2024
Emerging market central banks, WGC said, continued to dominate the gold market with Turkiye and Poland adding 72 tonnes and 69 tonnes, to their gold reserves, respectively, till October 2024.
The Reserve Bank of India (RBI) added 27 tonnes in October, bringing its total gold purchases to 77 tonnes till the month.
India's net buying till October was a five-fold increase on its 2023 activity, the report said.
Asian investors have been a near constant presence, while lower yields and a weakening dollar in Q3 of CY24 fuelled Western investment flows.
However, it is gold's role as a hedge amid rising market volatility and geopolitical risk that most likely explains its remarkable performance, WGC said.
Gold price outlook 2025
Most analysts expect 2025 to be a challenging year for gold as they face multiple headwinds.
Among them are Donald Trump's presidency and its impact on the global economy and financial markets.
Developments in China - one of the biggest consumers of gold - will also be a key monitorable.
Chinese consumers, WGC notes, have been on the sidelines in the last few months while investors have provided support.
But these dynamics hang on the direct (and indirect) effects of trade, stimulus and perceptions of risk.
Thrill-seeking investors, WGC believes, may benefit from an early wave of risk-on flows.
However, potential trade wars and inflationary forces may spill over to an expected sub-par economic growth.
The market consensus of key macro variables such as gross domestic product (GDP), yields and inflation - if taken at face value - suggests positive but much more modest growth for gold in 2025.
Upside could come from stronger-than-expected central bank demand, or from a rapid deterioration of financial conditions leading to flight-to-quality flows, the WGC note said.
Those at Goldman Sachs and UBS, too, expect a modest upside in gold prices in 2025 amid volatility as geopolitics and trade wars keep the overall sentiment in check.
Goldman Sachs expects gold prices to reach $3,150 per ounce (bull-case scenario; base case: $3,000/oz) by December 2025, an upside of around 17 per cent from the current levels.
A large part of this price rise, they believe, will also be fuelled by higher demand from global central banks coupled with concerns over US fiscal sustainability and trade tensions/wars.
Those at UBS, too, expect gold prices to hit $2,900 per ounce by December 2025 (earlier forecast: $2885/oz) in their base case.
On the upside, they expect the yellow metal to hit $3,000 an ounce by December 2025.
