Gold outshines equities in 5 years. Top 6 factors likely to dictate price in 2025?
Wed Mar 12 2025
Over the past five years, gold has notably outperformed Indian equities, with prices rising between 70% and 75%, compared to the 50% to 60% returns from the Sensex. This trend underscores gold's role as a preferred safe-haven asset amid global economic uncertainties.
Several key factors are anticipated to influence gold prices in 2025:
1. Trade Tariffs: Ongoing trade disputes, particularly those involving the U.S., have heightened inflation concerns. While such tariffs can increase demand for gold as a hedge against inflation, they may also dampen consumer sentiment and spending, potentially easing inflationary pressures.
2. Labor Market Dynamics: In the U.S., declining immigration and rising deportations are expected to tighten the labor market, leading to increased wages and production costs. These costs are likely to be passed on to consumers, further fueling inflation.
3. Inflation Trends: Persistent inflationary pressures can erode purchasing power, prompting investors to seek refuge in assets like gold, traditionally viewed as an inflation hedge.
4. Interest Rates: The Federal Reserve's monetary policy, especially decisions regarding interest rates, plays a crucial role in gold's appeal. Lower interest rates reduce the opportunity cost of holding non-yielding assets like gold, potentially boosting its demand.
5. Geopolitical Tensions: Global political uncertainties, including conflicts and trade tensions, often drive investors toward safe-haven assets like gold, influencing its price dynamics.
6. Central Bank Policies: Purchases of gold by central banks, particularly in emerging markets, can significantly impact global demand and prices.
In summary, gold's performance relative to equities over the past five years highlights its significance as a hedge against economic uncertainties.
Source: https://economictimes.indiatimes.com/