Ganesh Chaturthi 2024: Gold Price Predictions for 2025 – Will It Reach $3,000?

Ganesh Chaturthi 2024: With the Indian stock market soaring to record highs and a surge in initial public offerings (IPOs) in the primary market, experts suggest that now might be an ideal time to increase exposure to gold. Analysts anticipate that the price of gold could reach the $3,000 mark in 2025.

Gold is currently valued near $2,500, and several factors are expected to drive bullion prices even higher. These factors include aggressive rate cuts by the US Federal Reserve, slowing economies in both the US and China, persistent inflation exceeding the Fed’s 2 per cent target, ongoing geopolitical tensions, and an increase in gold purchases by central banks.

Gold price to shine brighter in 2025

Another factor contributing to the potential rise in gold prices to $3,000 per ounce in the coming year is the strong inflow of funds into exchange-traded funds (ETFs), as noted by analysts from Citi and Bank of America.

Another significant factor that experts in India believe will boost gold prices is a potential rate cut by the US Fed. The market has already factored in a 25 bps rate cut this month, but with disappointing US jobs data in August, there is speculation that the overall size and scope of Fed cuts for the year could be as much as 200 bps, which is a positive indicator for gold prices.

Recent data from the Labor Department showed that non-farm payrolls in the US increased by 142,000 in August, falling short of the estimated 160,000. July numbers were also revised downward to 89,000.

Ajay Garg, director and CEO of SMC Global Securities, highlighted that geopolitical tensions, including the Ukraine conflict and instability in the Middle East, alongside persistent inflation above the Fed’s target, are expected to keep gold prices elevated in 2025.

Garg stated, “Gold has a positive correlation with inflation, indicating that prices should rise. Geopolitical uncertainties, the US election, and ongoing central bank gold purchases are likely to drive gold prices to the $2,800-3,000 range in 2025. Furthermore, with an increase in M2 supply, gold is expected to see further appreciation.”

M2 measures the money supply, encompassing cash, checking and savings deposits, money market securities, and other time deposits.

Joseph Thomas, head of research at Emkay Wealth, pointed out that the optimism in the markets stems from the high likelihood of US rate cuts, coupled with central banks’ shift toward gold and its status as a safe-haven asset.

Thomas stated, “The 25 per cent rise in gold’s value this year alone has prompted many to gradually incorporate gold into their investment portfolios.”

Thomas emphasized that the steady climb of gold to $2,500 has been relatively consistent without any significant price corrections.

“The continuous demand for gold from central banks and the resulting increase in the gold component of forex reserves suggest that central banks are acquiring gold as an alternative to assets denominated in currencies like the US dollar. This narrative gains traction with the expected decline in US yields as the Fed initiates rate cuts, a trend observed in the past,” noted Thomas.

Thomas highlighted that an extended period of high rates and elevated inflation could lead to a slowdown in economic growth, signs of which are already apparent in various indicators, especially in infrastructure and employment. These factors support the projection of higher gold prices.

However, Thomas added that the market has already factored in some of these variables, potentially capping the rise around $2,600 or in proximity to that level.

In India, spot gold prices have surged by 14 per cent year-to-date, aligning with the 14 per cent rise in the Nifty 50 equity benchmark.

Factors such as central bank acquisitions, safe-haven demand amid escalating geopolitical tensions, hopes for rate cuts, and investments in exchange-traded funds (ETFs) have driven the increase in gold prices.

Naveen Mathur, director of commodities and currencies at Anand Rathi Shares and Stock Brokers, indicated that the impressive upward trend seen since last year has shown signs of easing since mid-April 2024, particularly in China, which exhibits signs of fatigue due to higher prices. Nevertheless, a traditionally weaker month for global equities in September may lead to short-term price pullbacks of 5 – 8 per cent.

However, this potential decline could be offset by robust physical gold purchases in India for the remainder of the year, driven by reduced prices following the import duty reductions in July, along with robust demand during the festive and wedding season starting from October onwards, Mathur pointed out.

Mathur stressed that gold has historically thrived in times of economic uncertainty, especially with US interest rates at multi-decade highs and emerging growth concerns.

“Historically, the Federal Reserve has only achieved a soft landing twice after nine tightening cycles over the past five decades. The other seven instances ended in a recession. Data from the World Gold Council suggests that previous US recessions typically commenced five to 13 months after reaching similar levels of job growth, indicating the possibility of negative growth starting as early as the first quarter of 2025,” highlighted Mathur.

“Strong investor confidence and underlying demand could propel gold prices to unprecedented heights in the coming years, with potential returns of 10 – 15 per cent in 2025. We anticipate an average spot gold price of $2,500 – 2,560 per ounce in 2025, compared to the year-to-date average of $2,270 per ounce in 2024,” Mathur projected.

Kaynat Chainwala, AVP of commodity research at Kotak Securities, forecasted that gold prices will continue to climb in 2025, bolstered by anticipated aggressive rate cuts, increased central bank acquisitions, and persisting geopolitical tensions.

“The markets are anticipating that the Federal Reserve will institute 200 basis points of rate cuts by the end of 2025. Recent data from the World Gold Council indicates a substantial rise in central bank gold purchases in July, underscoring their commitment to accumulating gold amid global uncertainties. Moreover, the demand for safe-haven assets fueled by ongoing tensions in regions like the Middle East and the Russia-Ukraine conflict may further propel gold prices,” Chainwala stated.

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Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.