A confluence of macroeconomic, geopolitical, and investment-related factors has driven Gold’s performance in 2024. With such strong tailwinds, Gold has solidified its position as a standout asset in the portfolios of both individual and institutional investors. Gold reached an all-time high of $2,790/oz in international markets, while in domestic markets, it soared to a record Rs.79,775/10gm. With returns of around 27 per cent in international markets and more than 20 per cent (20.91 per cent) in domestic markets, Gold outperformed most asset classes, including equities. The benchmark Nifty index, which touched record highs of 26,277 mark in September, has risen 8.5% year-to-date.
The key factors that enabled gold prices to outperform the Nifty 50, Sensex and Bank Nifty index
1] US Fed rate cut: The US Federal Reserve’s pivot toward monetary easing amid receding inflationary pressures significantly bolstered gold prices. The anticipated and actual rate cuts fuelled demand for Gold as a non-yielding asset.
2] Geopolitical tension: Persistent global tensions, including the Israel-Hamas conflict, the Russia-Ukraine war, and the fall of the Syrian government, heightened Gold’s appeal as a safe-haven investment.
3] Central Bank’s gold buying: Central banks, especially in emerging markets, continued their robust gold accumulation, purchasing 694 tonnes by Q3 2024. This buying spree mirrored 2022 levels, providing a strong structural tailwind for gold prices.
4] Rising investment demand: Renewed interest in gold-backed ETFs contributed to the price rally. After months of outflows, gold ETFs witnessed net inflows of $2.6 billion year-to-date, reflecting growing investor confidence in the asset.
5] Escalation in trade war: The US national debt has soared to a record $34 trillion, intensifying concerns about fiscal sustainability. This and rising trade war tensions further reinforced gold’sGold’s status as a reliable hedge.
