Concerns about European sovereign debt and continued geopolitical instability could be the positive trigger for gold in the current year, according to a report released by the Tata Mutual Fund on Tuesday. It also states that industrial demand will continue to drive silver this year.
Central banks’ demand for gold has remained higher in the last two years with a record buying of 1081.9 tonnes in 2022 and 1037.4 tonnes in 2023. However, central banks will likely continue their buying spree, diversifying their reserves.
The report adds that the buying momentum or fresh investment demand may kick in 2025 as investors will buy gold as store value amid concerns over trade war and global growth concerns intensify.
Trump’s policies are expected to add inflationary pressures and disruptions to supply chains. However, a slightly dovish Fed may be beneficial for gold.
Demand for silver in the industrial sector is likely to grow amid green economy applications particularly photovoltaics, EVs, investments in infrastructure, such as charging stations, power grids and rapid adoption of AI technologies.
Gold/Silver ratio (currently near 90) indicates silver is highly undervalued as compared to gold indicating potential to outperform the same in 2025. Silver remains seasonally positive in the January – February months of the year driven by robust industrial demand, especially in January month. However, a strong dollar and higher yields may limit the positive returns this year in Q1 2025.
With silver remaining in deficit for the fourth consecutive year in 2024, supplies are expected to improve in 2025.
Rate cut expectations, geopolitical instability, Chinese economic recovery, and continuity in silver ETF inflow are some of the other tailwinds for silver. US 10-year yields have been steady since September 2024, which could remain a major headwind to prices in Q1 2025.
