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The Indian gold market experienced a significant downturn as the year ended, with prices plummeting below Rs 79,000 per 10 grams in Delhi. This sharp decline, reported by the Press Trust of India (PTI), was attributed to subdued demand from stockists and retailers. The price of 99.9 per cent purity gold decreased by Rs 550, settling at Rs 78,950 per 10 grams, a considerable drop from Monday's closing price of Rs 79,350. This follows a remarkable year of growth, with gold prices surging by Rs 15,030, or 23.5 per cent, throughout 2024. This substantial increase reflects the impact of broader economic factors and global uncertainties.
The reasons behind the 2024 gold price surge are complex and multifaceted, according to experts. Saumil Gandhi, Senior Analyst of Commodities at HDFC Securities, cited geopolitical uncertainties as a key driver. The instability in the global political landscape creates a climate of uncertainty, leading investors to seek safe haven assets, such as gold, which typically increases in value during periods of economic and political turmoil. Additionally, interest rate cuts by Western central banks played a crucial role. Lower interest rates make gold a more attractive investment compared to interest-bearing accounts, as it maintains its value despite the reduction in returns from traditional savings options.
Another significant factor contributing to the gold price increase was robust demand from central banks and high-net-worth individuals (HNWIs). Central banks around the world have been actively increasing their gold reserves, which in itself helps to push up the price of the commodity in a cycle of increasing demand and value. Simultaneously, HNWIs are often attracted to gold as a hedge against inflation and economic uncertainty, adding to the overall pressure on prices. This combination of factors—geopolitical instability, low interest rates, and strong demand from both institutional and private investors—created a perfect storm that propelled gold prices significantly higher during 2024.
The silver market mirrored the gold market's volatility, experiencing a sharp decline. Silver prices dropped significantly by Rs 2,000, falling from Rs 91,700 per kilogram on Monday to Rs 89,700 per kilogram on Tuesday. This drop reflects a similar weakening in demand. However, the futures market showed a slightly different picture. Silver contracts for March delivery on the Multi Commodity Exchange (MCX) edged up slightly, showing a 0.19 per cent increase to Rs 87,700 per kilogram. This divergence between the spot and futures markets highlights the complexities of the commodity trading environment and the influence of speculation.
The gold futures market on the MCX also showed signs of recovery. Gold contracts for February delivery rose by Rs 253, or 0.33 per cent, to Rs 76,513 per 10 grams, suggesting a potential rebound in prices following Monday's losses. This recovery indicates that the initial drop in gold prices might be temporary and that market sentiment could be shifting back toward optimism. Jateen Trivedi, VP Research Analyst of Commodity and Currency at LKP Securities, attributed the range-bound behavior to thin trading volumes, largely a consequence of the holiday season and New Year celebrations. This diminished market participation reduced the overall level of trading activity, leading to less price volatility than might otherwise be expected.
The global market also experienced fluctuations. Comex gold futures gained $4.8 per ounce, showing a slight 0.18 per cent increase to $2,622.90 per ounce. However, Comex silver futures saw a dip of 0.16 per cent, closing at $29.37 per ounce during Asian market hours. This disparity between global and domestic market trends highlights the influence of regional factors on prices. Chintan Mehta, CEO of Abans Holdings, provided further insight, suggesting that gold prices remain relatively steady as traders temper expectations for Federal Reserve rate cuts in 2025, particularly after recent hawkish signals. The focus is now shifting to upcoming US economic data, such as the home price index, unemployment claims, and manufacturing PMI, which could significantly influence future gold prices.
Despite the subdued trading activity during the holiday period, analysts maintain a positive outlook for gold prices in the near future. They anticipate that as investors gradually increase their exposure to gold, prices will likely strengthen. Mehta noted that a delay in further interest rate cuts could lead to short-term declines, presenting potential buying opportunities for investors seeking to accumulate gold at lower prices. This perspective indicates that the current dip is viewed as a temporary setback, potentially offering investors a valuable window to purchase gold at more favorable rates. The long-term outlook for gold remains relatively positive given the ongoing global economic uncertainties and the demand for safe haven assets.
In conclusion, the recent dip in gold prices in Delhi represents a short-term fluctuation within a broader context of significant price increases throughout 2024. Various economic factors, including geopolitical instability, interest rate adjustments, and strong demand from central banks and HNWIs, have contributed to the long-term trend. While the holiday season led to decreased market participation, analysts remain optimistic, anticipating further strengthening of gold prices as investors increase their exposure. The interplay between domestic and global markets, as well as the release of key economic indicators, will continue to shape the future trajectory of gold and silver prices.