Gold Rate Today Stays Stable with 17.50% Returns in H1 FY25 – Is it a Good Time to Buy?

H-1FY25 review: Gold prices today held steady after a slight decrease of about one percent on Monday. In the global market, the spot gold price closed at $2,634 per troy ounce on Monday, while the MCX gold rate ended at ₹74,924 per 10 grams. The first half of the current financial year saw the MCX gold rate increase by approximately 10.75% in H-1FY25, rising from ₹67,677 to ₹74,924 per 10 grams. Similarly, the spot gold price climbed from $2,233 to $2,634 per troy ounce, marking a rise of around 17.50% in the first six months of FY25. Comparing the gold returns in H-1FY25 with the Nifty 50 returns, gold has outperformed the leading Indian stock market index by about 2%.

Key Factors Driving the Gold Price Rally in H-1FY25

Triggers for gold price rally in H-1FY25

Explaining the reasons behind the surge in gold prices in FY25, Sugandha Sachdeva, Founder of SS WealthStreet, noted, “The increase in gold prices reflects a complex interplay of geopolitical risks, shifts in monetary policy, and economic uncertainties that have influenced investor sentiment throughout 2024.”

“The primary drivers of the outstanding performance of gold include the initiation of a rate cut cycle in the US, coupled with expectations for further rate cuts in upcoming meetings. Additionally, geopolitical tensions between Israel and Lebanon have contributed to the upward trend in gold prices,” mentioned Colin Shah, MD at Kama Jewelry.

Adding to the discussion on the reasons behind the gold price rally, Anuj Gupta, Head of Commodity & Currency at HDFC Securities, highlighted, “The recent surge in gold prices can be attributed to two main factors: the US Fed rate cut and escalating tensions between Israel and Hamas. Following the announcement of the US Fed rate cut in September, there was a notable increase in gold prices globally. The prolonged conflict between Israel and Hamas raised concerns about global stability, leading to a surge in demand for safe-haven assets like gold.”

“Renewed investor interest in gold exchange-traded funds (ETFs) has significantly boosted inflows over the past four months. The growth in global gold ETF holdings by $2.1 billion in August has further fueled the rally in gold prices, with ETFs increasing their physical gold holdings to meet rising demand,” Sachdeva added. “Central banks, particularly in emerging economies, have ramped up their gold purchases to reduce reliance on the US dollar. These substantial purchases have provided a stable foundation for gold prices, reinforcing their upward momentum throughout the year.”

Gold Price Forecast

With the festive season approaching and favorable monsoon conditions, robust demand for gold is anticipated. The current testing of gold prices at the $2700 level suggests a potential touch of $3000 levels, while domestic prices are expected to surpass ₹78,000 in the medium to long term.

“Historically, gold has rallied by up to 10% six months after the initial Fed rate cut, and given the starting point of gold prices being higher than expected at the beginning of the Fed’s easing cycle, there is increased potential for further gains leading up to the year-end target. With uncertainties surrounding the upcoming US election and growing ETF demand, gold’s outlook remains positive,” noted CIO Investment Research at UBS.

The UBS CIO report emphasized the attractiveness of gold’s hedging qualities for long-term portfolio management. They suggested a 5% allocation to gold in a diversified USD-denominated portfolio for broad hedging purposes. Additionally, they revised their gold price forecasts, projecting prices to reach $2,750 per troy ounce by end-2024, $2,850 per troy ounce by mid-2025, and $2,900 per troy ounce by end-3Q25.

Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. Investors are encouraged to seek advice from certified experts before making investment decisions, considering the rapidly changing market conditions and varying individual circumstances.