Gold has outperformed Silver & Sensex in H1CY25

When it comes to returns, the general trend is that equity outperforms other asset classes. However, if we look at H1CY25, the story appears different - gold has outperformed the Sensex, while silver is slightly behind gold. Let us look at the numbers, the reasons behind gold shining, and the outlook for the second half.

Performances of Gold, Silver and, Sensex in H1CY25

The Multi Commodity Exchange (MCX) gold prices surged by 26.5% during the first half of 2025, marking a significant outperformance compared to silver and Indian equities. Silver prices rose by 23% in H1 CY25, driven by industrial demand and safe-haven investment flows. The BSE Sensex experienced a gain of approximately 8%, adding around 6,000 points, but remained about 2,000 points shy of its peak.

Factors Driving Gold's Outperformance

Here are some factors that led to a rise in gold prices in H1CY25:

1. Geopolitical Tensions: Geopolitical risks, including military conflicts, regional instability, and diplomatic tensions, often prompt investors to seek safer investments. Historically, gold has been considered a hedge against such risks, and it benefits from these situations. In 2025, ongoing conflicts in the Middle East, tensions in Eastern Europe, and the threat of a wider global conflict prompted investors to move their capital into gold. The uncertainty surrounding these geopolitical issues made gold an attractive asset as it is traditionally viewed as a safe haven during times of crisis.
2. Economic Uncertainty: Economic uncertainty refers to concerns about global economic growth, inflation, unemployment, and other factors affecting financial stability. When the economy faces challenges such as inflationary pressures or recessions, gold tends to perform well, as it is seen as a hedge against these factors. In the first half of 2025, global economic uncertainty was significant. Central banks around the world, particularly the US Federal Reserve, kept interest rates low or adopted accommodative policies to support sluggish economies. Meanwhile, inflationary pressures continued to be a concern in many developed nations. 
3. Central Bank Policies: Central banks, particularly the US Federal Reserve, the European Central Bank (ECB), and the People's Bank of China, play a significant role in determining economic conditions by adjusting interest rates and conducting open market operations. In 2025, the continued accommodative monetary policy stance by central banks worldwide kept interest rates low. While this was intended to support economic recovery, it also meant that the opportunity cost of holding gold was low. With interest rates near zero in many countries, investors found little incentive to have cash or bonds, prompting them to buy gold instead.
4. Currency Fluctuations: Gold is often traded in US dollars. Therefore, fluctuations in the value of the dollar have a direct impact on gold prices. When the US dollar weakens, gold becomes more affordable for holders of other currencies, thereby boosting demand for gold. In H1 CY25, the US dollar weakened relative to a basket of other major currencies, such as the euro and the yen, primarily due to shifts in economic policy and the broader global recovery following the pandemic. A weaker dollar meant that gold, priced in dollars, became more attractive to investors using other currencies.
5. Record Highs and Increased Demand: Gold prices reached record levels in early 2025, surpassing $3,500 per ounce, driven by the factors above. When gold reaches new highs, it often triggers increased buying by both retail and institutional investors, who expect further price appreciation. As gold prices hit record highs, the market experienced a "momentum effect," where increasing gold prices attracted more buyers. Investors, seeing gold’s continued price growth, viewed it as an opportunity for both wealth preservation and capital appreciation.

Outlook for H2CY25

While gold's rally may moderate, it is expected to remain supported by geopolitical uncertainties and economic concerns. Analysts forecast a trading range of $3,100 to $3,600 per ounce for the remainder of 2025.

Silver, on the other hand, is poised for further gains, bolstered by industrial demand and a favorable seasonal trend, with July historically being a strong month for silver. The Sensex is anticipated to continue its upward trajectory, supported by strong domestic institutional inflows and a potential revival in small and mid-cap stocks.

Before You Go

In H1CY25, gold outperformed silver and the Sensex, driven by geopolitical tensions, economic uncertainties, and investor behavior. Looking ahead to H2CY25, while gold's performance may moderate, silver and equities present promising opportunities for investors.