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According to Motilal Oswal Financial Services Limited (MOFSL), Silver could outperform Gold in a longer period. As per data, Gold and Silver have experienced notable year-to-date increases of 13% and 11%, respectively, from last cycle of the new year that starts with the auspicious occasion of Akshaya Tritiya.

MOFSL continue to maintain a positive stance for both Gold & Silver and recommends buying on dips with target towards of Rs.75,000 for gold and Rs 1,00,000 for silver on domestic front and $2450 for gold and $34 for Silver on Comex.

Both gold and silver has registered a positive advance in Q1’24, matching or even surpassing gains in other significant asset classes. In Q1’24 MOFSL has achieved the annual target for Gold and met more than 85% of annual target on Silver.

In the past, supply and demand issues have not had a significant effect on gold prices, particularly when the market is experiencing more extreme uncertainty. Given the recent, strong increase in gold prices, some cool off in price cannot completely ruled out.

There are both positives and negatives for Gold prices at this juncture, lower than expected economic data points, rise in growth concerns, higher rate cut expectations in this year, geo-political tensions, concerns regarding rising debt, increase in demand and fall in US Yields could act as tailwinds for prices. Volatility in election years has always increased in Gold, this year more than 40 countries are lined up for elections, including US and India. Market participants always discount future events in advance, like an early rate cut by Fed, hence any black swan event could further support the prices in future.

Gold’s Move until now

It is the year of safe haven assets, especially gold and silver who have seen a have seen a fantastic rally since the start of this year.

Two main factors triggering volatility in bullion market:

1) Geo-political tensions - Russia / Ukraine, Israel/Hamas, Israel/Iran and other geopolitical triggers, increase risk premium for safe haven prices

2) Fed monetary policy: Market expectations and Fed’s actions regarding interest rate cut this year has been keeping market on the edge

The rate of central banks purchasing gold did not slowdown in Q1, according to recent WGC reports, with 290t being added to official holdings. While demand for bars and coins increased by 3% year over year to 312t, it decreased by 2% year over year to 479t for jewellery worldwide. Central banks, led by Turkey, China, and India, increased their demand for gold by a record amount in the first quarter.

The most surprising factor for 2024 has been the imports of Gold and Silver. Since the start of the year, imports have been to tune of more than 150 tonnes and 3000 tonnes respectively. This jump in imports could be on the back of CEPA deal with UAE under the benefit of 1% TRQ or the import duty benefit that the market participants get under other bullions articles like granules or findings. 

Comparing gold returns over the last 15 years for Akshaya Tritiya, gold is delivered a 10% CAGR. There have been instances of some price correction, but overall rise in prices have been consistent and steady. There are several platforms for market participants to invest in gold based on their risk profile. From a longer-term horizon, it is advised to invest in SGB, which will help to capitalise the price rise in gold and an additional 2.5% interest each year to the investors. Several other modes to invest could be in form of ETF, which are now a very popular way of investments, exchange traded derivatives, Digital Gold and Physical bars and coins.

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