Has gold and silver outshone the Indian equity market in 2024?

When it comes to asset class with the highest returns, equity is a winner most often. However, if we look at the 2024 numbers, the story is different. In 2024, the winners are gold and silver, and they left behind the equity return by a large margin. These metals performed well because of several factors, including geopolitical tensions, economic instability, and shifting global monetary policies. Let us look at the details.

The Numbers: Gold, Silver and Equity

The demand for gold and silver remained robust throughout most of 2024, fueled by ongoing geopolitical tensions and uncertainty surrounding potential US interest rate cuts. Gold delivered a remarkable return of 21%, while silver posted strong gains of 17% for the year.

In comparison, Indian equity markets showed moderate growth, with the BSE Sensex rising by 8% and the NSE Nifty50 gaining 9%. These gains were achieved in the middle of significant volatility and consistent foreign investor outflows, especially in the last quarter of the year.

Despite these challenges, stock markets provided respectable returns during much of 2024. However, heightened volatility in the last quarter, triggered by selling pressure from foreign portfolio investors and concerns over high valuations, impacted overall market stability.

How it happened?

Gold began 2024 on a strong footing, trading at around $2,070 (approximately Rs 63,000 per 10 grams). Its price dipped slightly to $2,000 (₹61,000) in mid-February before soaring to an all-time high of $2,800 (Rs 80,000) per ounce in October, driven by robust demand and favorable market conditions.

India’s gems and jewelry sector continues to thrive, with projections estimating market growth to $100 billion by 2025. This growth is underpinned by the nation’s pivotal role as a leading global hub for the production, export, and domestic consumption of jewelry.

The Way Forward

Gold has been a consistent performer since 2016, with the exception of 2021, demonstrating its resilience as a preferred investment asset. Experts project an optimistic trajectory for the yellow metal. In the medium term, gold prices in India are expected to reach Rs 81,000 per 10 grams, with a long-term target of Rs 86,000. On the global stage, COMEX gold prices are forecasted to hit $2,830 in the medium term, potentially extending to $3,000 over the long term, reflecting a bullish outlook driven by geopolitical uncertainties and sustained demand.

Silver, often considered gold’s volatile counterpart, is predicted to outperform in the coming year. Experts anticipate silver prices to surge to Rs 1,25,000 per kilogram on the MCX in 2025. This projection is supported by a favorable industrial demand outlook and silver's historical tendency to outperform gold during precious metal bull runs.

The target for Nifty50 (equity) for 2025 has a wide range. However, most brokerage houses have given at least 10% upside. For example, Jefferies has given a target of 26600 for Nifty50 by the end of 2025.

Before you go: Key Takeaways

For years like 2024, it is often suggested that investors should diversify and make metals in their portfolio. Here are two key ways after looking at returns for 2024of all three investment options:

• Diversification Benefits: Precious metals offer strong portfolio diversification, with lower correlations to equity markets, helping you reduce risk.
• Inflation Hedge: Gold and silver have acted as reliable hedges against inflation, a critical factor in a year marked by high interest rates globally.

For 2025, analysts remain optimistic about gold and silver, with projections suggesting further potential upside due to continued geopolitical tensions, central bank purchases, and robust industrial demand for silver.