Market News
4 min read | Updated on December 22, 2024, 23:42 IST
SUMMARY
In 2024, gold rose 19.57% YTD, silver hit a 12-year high, and both outperformed key indices due to geopolitical tensions, US monetary easing, and rising renewable energy demand.
Gold and Silver in 2024: Performance, Influencing Factors, and 2025 Outlook
This year has been one of the best years for precious metals. Bullion, as an asset class, has performed exceptionally well in 2024. In fact, until November 2024, gold's return outperformed the US benchmark by delivering a 28% YTD return in dollar terms. However, as of December 20, NASDAQ (27.6% YTD) is slightly outperforming gold (26.3% YTD).
Returns on gold are not uniform across the globe, as currency fluctuations play a significant role. If you had purchased gold in India, your returns would not match the 26% gain in 2024, as currency depreciation impacts the returns. In India, your returns would be approximately 19.7%. The rise in gold prices can be attributed to its safe-haven appeal, which benefitted the asset class amid heightened geopolitical tensions throughout the year.
Silver’s performance this year has also been impressive, reaching its highest levels in recent months during October 2024. This was supported by US monetary easing and growing demand for silver in sectors like renewable energy technologies such as solar panels.
Here is a chart from TradingView showcasing YTD returns: gold delivered a 19.57% YTD return, and silver a 16.62% YTD return. Both metals outperformed the NIFTY 50 index on a YTD basis.
The surge in gold prices was driven by central bank purchases, geopolitical risks, and a volatile global economy. Western investors increased their investments in gold due to declining interest rates. Asian investment also contributed to the price rise despite weak consumer demand.
Silver prices reached its highest levels in recent months during October 2024, driven by its dual role in industrial applications (accounting for half of silver demand) and investment (about 24%). US monetary easing and growing demand for renewable energy technologies like solar panels were key factors behind the silver price rise.
Price volatility is a key factor when comparing gold and silver. Silver is generally more volatile due to its smaller market size and industrial demand, which leads to sharper price swings. Above chart from Trading Economics can help visualise this difference. Interestingly, despite the silver price rise, its current value remains below its 1980 peak.
Gold prices are affected by four major factors: economic expansion, risk and uncertainty, opportunity cost, and market momentum. These factors collectively shape the demand and supply dynamics of gold, thus impacting its pricing.
In the Union Budget, a 9% cut in import duties on gold and a revision in taxation, reducing LTCG from 36 months to 24 months (with the tax rate lowered from 20% to 12.5% without indexation), supported Indian gold demand.
The prices of gold and silver will depend on various scenarios. Let’s discuss three probable scenarios: base, bullish, and bearish.
Gold is expected to remain elevated compared to past averages, while silver is also likely to show modest gains, as supply may lag behind the growing global demand for the metal.
About The Author
Next Story