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 According to Motilal Oswal Financial Services Ltd (MOFSL), silver could either match or outperform gold in the medium to long term. It expects silver to reach targets of ?1,25,000 on MCX and $40 on COMEX in the next 12 to 15 months. Recently, silver has shown impressive performance, gaining more than 40% YTD and breaching ?100,000 on the domestic front, fueled by safe-haven buying and robust industrial demand.

MOFSL has also set targets for gold of ?81,000 in the medium term and ?86,000 in the long term. It expects gold to reach $2,830 on COMEX in the medium term and $3,000 in the long term. Gold has consistently been one of the best-performing assets in recent years - barring 2021, as the yellow metal has closed in the green on the domestic front since 2016. This year stands out as particularly remarkable, with gold reaching all-time highs on both the Comex and domestic markets, posting gains of more than 30% year-to-date.

Mr. Manav Modi, Analyst, Commodity Research, Motilal Oswal Financial Services said, “2024 has experienced a significant price rally fuelled by market uncertainties, expectations of rate cuts, rising demand, and a depreciating rupee. The months following the U.S. presidential election will be critical in shaping gold's near-term trajectory. Hereon, the two key factors underpinning this year’s rally in precious metals are expectations of rate cuts from the Federal Reserve and rising geopolitical tensions, particularly in the Middle East. Overall, the sentiment for this Diwali is projected to be positive, raising optimism for bullion”.

How Gold has performed during Diwali

This year’s Festival of Lights coincides with two significant events: the U.S. presidential election and the ultimate Federal Reserve policy meeting of 2024. Historically, demand for gold tends to surge during the festive season, enhancing market sentiment. Yet, recent concerns over rising prices could dampen overall demand. While domestic demand may experience a slight dip, prices could still find support amid these major events. Regardless of shifting narratives or market volatility, one constant remains - gold has historically served as a reliable store of value during uncertain times. According to MOFSL, if one had invested in gold during Diwali 2019, they would be enjoying ~ 103% returns on their domestic gold investments by this Diwali.

According to MOFSL analysis of leap years and historical patterns of Gold, since 2011, there have only been two instances (2015 and 2016) where the 30 days leading up to Diwali recorded negative returns. Aside from 2022, pre-Diwali gains have consistently outpaced post-Diwali gains.

“We continue to believe that gold has further upside potential wherein any dips could present buying opportunities. According to our recent quarterly report, a correction of 5-7% is plausible and could serve as an accumulation zone”, added Manav Modi.

Factors that will can impact Gold & Silver  

Two key factors underpinning this year’s rally in precious metals are rate cut expectations from the Federal Reserve and rising geopolitical tensions, particularly in the Middle East.

Federal Reserve's recent 50 bps rate cut aims to stimulate growth amid easing inflation and a softening labor market. However, Fed officials are sending mixed signals, cautioning against early optimism while acknowledging decent job growth and positive GDP figures. Meanwhile, escalating geopolitical tensions, notably from conflicts like Russia's invasion of Ukraine and the situation involving Israel and Hamas, is increasing distress in market. Market participants are closely monitoring economic data from the U.S. as well. The upcoming U.S. presidential election could also impact these geopolitical dynamics. Political rivalry between former President Donald Trump and current Vice President Kamala Harris may introduce considerable market volatility, given their differing foreign policy and military engagement perspectives.

According to MOFSL, U.S. presidential elections occur in leap years, which often bring sharp volatility in the commodities segment—an environment that has generally favored gold and silver. However, between 2012 and 2016, there was only one negative return period for these metals during leap years, with the rest showing positive momentum.

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