Gold and silver markets are riding a wave of volatility, and to make sense of it all, Naveen Mathur, Director of Commodities & Currencies at Anand Rathi Share & Stock Brokers, breaks down the trends shaping bullion and currencies, while offering a glimpse into what lies ahead.
2024: A strong year for bullion
Gold and silver saw significant gains in 2024. International gold prices rose by 27% in dollar terms and 21% in Indian markets. Silver followed closely, with a 23.5% gain internationally and 20% in India. Both metals touched record highs, with gold reaching Rs 79,800 per 10 gm and silver crossing Rs 1 lakh per kg in September-October. Dollar depreciation, geopolitical factors, and U.S. elections were primary drivers of these gains.
However, the recent strengthening of the dollar, coupled with reduced expectations of Federal Reserve rate cuts, has tempered bullion’s momentum. Gold currently trades at $2,623 per troy ounce, with a support level at $2,609 and resistance at $2,664.
Impact of currency movements
Global currency dynamics are also influencing gold and silver. The Bank of Japan’s signal for interest rate hikes and a strengthening dollar have added pressure to bullion prices. Emerging market currencies, including the Indian rupee, have experienced volatility.
The rupee recently touched a low of 85.8 against the dollar, with an anticipated trading range of Rs 84.95 to Rs 85.70 for the coming weeks. The dollar index, after peaking at 108.54 on December 20, is expected to trade between 107.5 and 108.5 due to reduced liquidity during the holiday season.
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Investment strategy for 2025
I always emphasise that gold and silver, particularly gold, should not be viewed solely as return-oriented asset classes. Instead, they play a crucial role in portfolio diversification. While gold has delivered decent returns this year, similar performance may not continue, but its importance in balancing risk remains vital.Allocating 10-12% of your portfolio to gold can enhance risk-adjusted returns. Today, investors have multiple options beyond physical gold, such as sovereign gold bonds, ETFs, coins, and trading on exchanges. These provide flexibility and accessibility for a diversified strategy.
Investing in gold should be approached with a long-term perspective. A staggered investment strategy, similar to systematic investment plans (SIPs), is ideal. This helps investors benefit during economic downturns or geopolitical uncertainties when gold traditionally acts as a safe haven. By adopting this approach, gold can effectively smooth out equity market losses, making it an essential asset for portfolio diversification. “Gold continues to be a reliable asset for long-term portfolio stability. If you’re looking to invest in gold, options like Nippon Gold BeeS and Nippon Gold ETFs offer good liquidity. For silver, silver ETFs are a practical choice, making it easier to buy and sell in the market.” he said.
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