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Gold and silver have experienced an impressive rally in 2024, gaining approximately 30% and 35%, respectively, on the COMEX. After hitting a peak- some cool off started to set in as uncertainties started to fade off. The surge largely comes after a period of pandemic-driven economic uncertainty and is underpinned by several key factors, primarily central bank policies and geopolitical tensions. In addition, a range of other dynamics, such as supply-demand imbalances and domestic market conditions, have influenced the price movement of these metals. The role of central bank actions and geopolitical risks in driving gold and silver prices has been a key factor, considering the broader economic environment.

Central Bank monetary policies are pivotal in shaping economic conditions, and recent developments from the Federal Reserve highlight this dynamic. The Fed's announcement of a 50 bps rate cut indicates a proactive approach to stimulate the economy amid easing inflation and concerns regarding the labour market. However, even though job growth has softened, it remains at decent levels, along with that positive GDP growth suggests overall economic stability. This context may lead to a more cautious pace of future rate cuts, which is also being reflected in fed officials speeches. However, change in policies by President-elect Trump could also bring fluctuations in rate cut expectations. Since the beginning of the year, Fed officials' comments and shifting market expectations have kept investors on edge, reflecting the uncertainty surrounding future monetary policy. As central banks navigate these complex economic landscapes, their decisions will significantly impact consumer behaviour, investment strategies, and overall economic growth.

In addition to domestic monetary policies, geopolitical risks have added a layer of complexity to the market dynamics. The Middle East, in particular, has become a focal point for rising tensions, particularly with the ongoing conflict between Israel and Hamas and broader instability in the region. These geopolitical crises have led to a heightened demand for gold and silver, as both metals are considered safe-haven assets in times of uncertainty. Recently, Israel’s defence minister told troops to fortify their position in newly seized Syrian territory, marking plans to send in reinforcements and equipment’s despite UN demands that country retreat immediately. Since rebels attacked the capital Damascus and toppled Bashar al-Assad’s regime over the weekend, Israeli ground forces have crossed beyond previously demilitarised buffer zone in Syria. Investors, seeking to shield their portfolios from geopolitical risks, often turn to gold and silver as reliable stores of value. Post the victory of President elect Trump, market participants have started discounting possible ease off in these tensions. There have been a lot of updates as well regarding cease fire deal between Israel and Hamas however, concrete evidence will be required for the same for any major impact on the market.

The dollar index, which has been volatile throughout 2024, further underscores the complexity of the current market conditions. Despite the Fed’s rate cuts, the dollar index remained resilient, recovering quickly after falling to lower levels. This resilience was driven by the increasing demand for the dollar as a safe-haven currency during times of crisis, particularly amid geopolitical unrest. The inverse relationship between the U.S. dollar and precious metals has held true; when the dollar strengthens, gold and silver prices tend to fall, and vice versa. The ongoing geopolitical tensions, including the conflict in the Middle East, have reinforced the dollar's appeal, creating a tug-of-war between the strength of the U.S. currency and the demand for precious metals. As the dollar remains volatile, it adds another layer of uncertainty to the outlook for gold and silver prices.

While central bank policies and geopolitical risks are significant drivers of gold and silver prices, other factors also play a role in shaping the market. In 2024, global demand for precious metals has increased substantially. Central banks worldwide, including those in emerging markets, have been net buyers of gold for over a decade. In 2024, they collectively purchased more than 500 tonnes of gold, reflecting a strategy to diversify reserves amid economic uncertainties. This growing interest from central banks has added upward pressure on prices, as these institutions accumulate gold as a hedge against the volatility of fiat currencies. The recent resurgence in gold ETFs, which had seen outflows in previous years, indicates renewed investor interest in gold as a safe-haven asset. In India, domestic demand has surged, with assets under management in gold and silver ETFs surpassing ?30,000 crores and ?7,500 crores, respectively. Additionally, the reduction of import duties on gold and silver by the Indian government has spurred demand, especially during festive and wedding seasons, further driving up prices. Overall imports for both gold and Silver on the domestic front has been quite sharp with this year, totalling to more than 700 tonnes and 6000 tonnes respectively. Gold has performed on both domestic as well as on COMEX however, interestingly returns differ between both. This difference is amidst drop in import duty by 9% and ~2% rupee depreciation.

“Looking ahead, the outlook for gold and silver remains positive, although some market consolidation or short-term dips may present buying opportunities. Loose monetary policy environment, coupled with ongoing geopolitical risks, should continue to provide a favourable backdrop for gold and silver. Central banks’ ongoing support for their respective economies, combined with the persistent demand for safe-haven assets, suggests that the upward momentum in these precious metals could continue. China still remains a big question mark in terms of the overall growth however, above mentioned factors could continue to support both Gold and Silver prices. Amidst current actions i.e. the stimulus measures work in favour of China, that recovery could also support metal prices, especially industrial metals including Silver. For investors, a buy-on-dips strategy appears prudent” added Manav Modi.

“Silver is down, but not out”, as it takes a breather before the next leg up, we remain positive over the medium to long term prospects. Support are near ?85,000- ?86,000; for targets towards ?1,11,111 and ?1,25,000 on domestic front & $38.55 and $43 on Comex. Buying on dips is recommended from a 12-15 month perspective.

For Gold: We maintain a positive bias and have revised our upward potential target towards ?81,000 on the domestic front. Over the next 2 Years, Gold could be on track for the targets of ?86,000, hence “Buy on dips" is recommended. We could see Comex Gold targeting $2,830 from a medium term perspective, while longer term targets could extend to $3,000 and higher

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