New Delhi: Central banks and Gold Exchange Traded Fund (ETF) investors will continue to be the key drivers of gold demand in 2025, as per a report. Geopolitical tensions and economic uncertainties are expected to push gold prices higher, while central banks’ actions will play a significant role in shaping the precious metal market.
According to the Motilal Oswal Private Wealth report, gold emerged as one of the top-performing asset classes in India in 2024, with a remarkable 21 per cent return year-on-year (YoY). The Indian market has shown a strong investment interest in gold, driven by record inflows into gold ETFs.
In 2024, Indian gold ETFs saw net inflows of Rs 112 billion, adding 15 tonnes to their holdings, which reached 57.8 tonnes by the end of the year. This growth signals strong demand from both institutional and retail investors, the report said.
The Reserve Bank of India (RBI) also continued its trend of gold accumulation, adding 72.6 tonnes of gold to its reserves in 2024, bringing its total reserves to 876 tonnes. This marks the seventh consecutive year the RBI has been a net buyer of gold. Gold now constitutes 10.6 per cent of the RBI’s foreign exchange reserves.
While high prices affected jewellery demand, the investment demand for physical gold, especially bars and coins, remained strong. Motilal Oswal reports that although the demand was subdued in 2024 due to high prices, it was expected to recover gradually in mid-January, driven by wedding season purchases. However, price stability will remain a key factor in this recovery.
On the silver front, the report notes that there has been a persistent deficit in supply over the past four years, with demand exceeding supply, which has kept silver prices supported. Industrial demand for silver has been steadily increasing since 2020, reaching all-time highs, especially driven by manufacturing and industrial activity in China and the potential growth in green technologies.
However, silver remains more volatile compared to gold, showing price swings similar to Indian equities. Therefore, while gold can serve as a long-term strategic asset in portfolios, silver is recommended for more tactical allocations.