Yellow metal looks ready to make way for stocks

 

With gold up 25% in early 2025, experts see limited upside as global risks ease.

MUMBAI: Indian investors appear to taking a U-turn from safe haven gold to riskier assets Ike equities, as green shoots of geopolitical stability begin to emerge across the globe.

With the precious metal already delivering returns as high as 25% in the first four months of 2025, experts believe there is limited room for signifi cant upside, especially as global uncertainties begin to wane This likely explains why domestic gold exchange traded fund (ETF) redemptions reached a one-year high last month.

Moreover, gold has remained ander pressure lately, with pri-ces being very volatile in the last three to four weeks. Going for ward. Kaynat Chainwala, associ ate vice-president of commodity research at Kotak Securities, anticipates a 7-8% correction in gold prices in the short term, driven by easing US-China trade tensions.

"However, gold prices still have room for improvement with eventual (US) rate cuts on the horizon and continuous cen tral bank buying. Till then, gold can find a key support at the $3080 per ounce level," she said But gold's geopolitical risk premium is beginning to fade as the ongoing US-China trade negotiations have shown signifi cant progress, noted Apurva Sheth, head of market perspec tives and research at Samco Securities.

Last week, the US agreed to cut duties on Chinese exports to 30% from 145% for 90 days, while China reduced its tariffs on US goods to 10% from 125% for the same period, signalling an intent to de-escalate and move towards a structured trade agreement. "This has reduced the need for investors to seek shelter in traditional safe haven assets like gold," Seth added.

 In fact, during the latest Mint quarterly market survey, Jay Kothari, lead equity strategist at DSP Mutual Fund, noted that the best way to play gold from hereon is through gold-related equities

Uncertainty defined FY25, marked by shifting policies and global tensions. Gold capitalized on this instability, outshining other asset classes. 

To be sure, gold returned around 27% in 2024, outper-forming every other asset class and marking its ninth consecutive annual gain Inst year. A cou ple of ongoing wars, relentless central bank buying-for diversi fying reserves and reducing reli ance on the US dollar-and a weakening global outlook drew investors to gold, as they faced a spate of uncertainties in the near term.

US President Donald Trump's tariff tantrums and the recent rout in the US currency and trea sury market further increased the appeal for gold as the only reliable safe haven asset, further fuelling its rally in 2025.

In India, gold prices touched an all-time high of ₹100.000 per 10g in the retail market last month. The surge in demand for the yellow metal reached a 15-year high in 2024, fuelling its meteoric price rise.