H-1FY25 review: Gold rate today held its ground after losing around one per cent on Monday. In the international market, spot gold price finished at $2,634 per troy ounce on Monday, whereas the MCX gold rate finished at ₹74,924 per 10 gm mark. As Monday was the last trading day in the first half of the current financial year, MCX gold rate registered around 10.75% rally in H-1FY25 as it ascended from ₹67,677 to ₹74,924 per 10 gm mark. The spot gold price surged from $2,233 to $ 2,634 per troy ounce, recording around a 17.50% rise in the first six months of FY25. Comparing the gold return in H-1FY25 with the Nifty 50 return, the yellow metal has outperformed the frontline Indian stock market index by around 2%.

According to commodity market experts, the US Fed rate cut, tension in the Middle East and Southeast Asia, rising US economic concerns, and a surge in gold ETF holdings are critical drivers for the gold price rally in H-1FY25. These factors combined to fuel the yellow metal throughout the financial year 2024-25.

Triggers for gold price rally in H-1FY25

Speaking on the reasons that fueled gold prices in FY25, Sugandha Sachdeva, Founder of SS WealthStreet, said, "The rally in gold price reflects the complex mix of geopolitical risks, monetary policy shifts, and economic concerns that have influenced investor behaviour throughout 2024."

"The key drivers behind the stellar performance of gold is the beginning of a rate cut cycle in the US, followed by strong anticipation for further rate cuts in the upcoming meetings. The geopolitical tensions between Israel and Lebanon are also pushing gold prices up," said Colin Shah, MD at Kama Jewelry.

Highlighting the primary reasons that are instrumental in the gold price rally, Anuj Gupta, Head of Commodity & Currency at HDFC Securities, said, "Recent rise in gold prices can be attributed to the two major reasons: US Fed rate cut and rising tension in Israel-Hamas. After announcing the US Fed rate cut in September, we witnessed a decent rally in gold prices worldwide. Later on, the Israel-Hamas war getting extended for such a longer period triggered uncertainty about global merchandise. This triggered demand for the haven, and gold prices started climbing to a new peak."

"Investor interest in gold exchange-traded funds (ETFs) has rebounded strongly, with significant inflows over the past four months. Global gold ETF holdings grew by $2.1 billion in August, bolstering the metal's rally as ETFs increase physical gold holdings to meet rising demand," said Sugandha Sachdeva, adding, "Central banks, especially in emerging markets, have ramped up gold purchases to reduce their dependence on the U.S. dollar. These large-scale purchases have provided a steady support base for gold, reinforcing its upward momentum throughout the year."

Gold price outlook

“The demand for gold is expected to be robust with the onset of festive season. A good monsoon year will push rural demand. Gold prices are currently testing the $2700 level; the expectation is it may touch $3000 levels, whereas domestic market prices are expected to cross ₹78,000 in the mediumtolong term.”

"According to the World Gold Council, gold has historically rallied by as much as 10% six months after the first Fed cut. As the metal's starting point is higher than we expected it to be at the start of the Fed's easing cycle, we see increased scope for gains to the year-end target, particularly as the US election is fast approaching (meaning more uncertainty), and ETF demand is picking up momentum. Meanwhile, although the Swiss gold export data signals slowing Chinese demand, we believe this relates more to the exhaustion of the country's quota rather than a weakening of underlying demand by local investors," says CIO Investment Research at UBS.

The UBS CIO report added, "Overall, we recommend gold's hedging qualities as attractive for the long term from a portfolio perspective. We reiterate our recommendation for a diversified USD-denominated portfolio to include a 5% allocation to gold as a broad portfolio hedge. We also like select gold miners (although this remains a more tactical call)," adding, “We raise our gold forecasts to $2,750 per troy ounce by end-2024 (from $2,600 per troy ounce), $2,850 per troy ounce by mid-2025 (from $2,700/oz), and $2,900 per troy ounce by end-3Q25 (from $2,750 per troy ounce).”

Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and individual circumstances may vary.