While central bank policies and geopolitical risks are significant drivers of gold and silver prices, other factors also play a role in shaping the market, according to the report by Motilal Oswal Financial Services Ltd (MOFSL).

In 2024, global demand for precious metals has increased substantially. Central banks worldwide, including those in emerging markets, have been net buyers of gold for over a decade. In 2024, they collectively purchased more than 500 tonnes of gold, reflecting a strategy to diversify reserves amid economic uncertainties, said the report.

“Looking ahead, the outlook for gold and silver remains positive, although some market consolidation or short-term dips may present buying opportunities. Loose monetary policy environment, coupled with ongoing geopolitical risks, should continue to provide a favourable backdrop for gold and silver,” said Manav Modi, analyst, Commodity Research, MOFSL.

This growing interest from central banks has added upward pressure on prices, as these institutions accumulate gold as a hedge against the volatility of fiat currencies.

The recent resurgence in gold ETFs, which had seen outflows in previous years, indicates renewed investor interest in gold as a safe-haven asset.

“In India, domestic demand has surged, with assets under management in gold and silver ETFs surpassing Rs 30,000 crore and Rs 7,500 crore, respectively. Additionally, the reduction of import duties on gold and silver by the Indian government has spurred demand, especially during festive and wedding seasons, further driving up prices,” the report mentioned.

Overall imports for both gold and Silver on the domestic front has been quite sharp with this year, totalling to more than 700 tonnes and 6,000 tonnes, respectively.

“The role of central bank actions and geopolitical risks in driving gold and silver prices has been a key factor, considering the broader economic environment,” the report noted.

Central Bank monetary policies are pivotal in shaping economic conditions, and recent developments from the Federal Reserve highlight this dynamic.

The US Fed's announcement of a 50 bps rate cut indicates a proactive approach to stimulate the economy amid easing inflation and concerns regarding the labour market, said the report.

Courtesy Media Group: IANS