The Economic Survey 2024-25, presented in Parliament on Friday, has projected a decline in gold prices in 2025, while silver prices are expected to increase. The survey cited the World Bank’s Commodity Markets Outlook for October 2024, which forecasts an overall 5.1% drop in commodity prices in 2025 and a further 1.7% decline in 2026.
Commodity Price Trends: Decline Led by Oil Prices
The projected declines in commodity prices are primarily driven by falling oil prices, although the impact will be balanced by rising natural gas prices and stability in metals and agricultural raw materials. Among precious metals, gold is expected to see a price decline, whereas silver may witness a price rise. The survey further indicated that metals and minerals prices will likely drop, with iron ore and zinc seeing the most significant reductions.
Impact on Domestic Inflation and Foreign Exchange Reserves
The downward trend in commodity prices, particularly those imported by India, is seen as a positive sign for the country’s domestic inflation outlook. Meanwhile, global economic uncertainties have led to shifts in foreign exchange reserves, with gold bullion holdings reaching their highest levels since World War II. This increase in gold reserves is largely attributed to emerging market central banks accumulating gold as a safeguard against economic instability.
Gold and Silver Market Dynamics
Gold imports have surged, influenced by rising global prices, early purchases ahead of the festive season, and demand for safe-haven assets. However, with gold prices expected to decline in 2025, investor sentiment may shift. In contrast, the expected rise in silver prices could provide some stability to the bullion market.
Shifts in the Global Reserve System
The survey also pointed to steady changes in the global reserve system, as noted by the International Monetary Fund (IMF). A gradual shift away from the dominance of the US dollar is underway, with an increasing role of non-traditional currencies.
Government’s Focus on Price Movements
As India, one of the world’s largest gold importers, prepares for the upcoming fiscal year, the government is expected to closely monitor bullion price movements and their potential effects on inflation, trade balance, and foreign exchange reserves. Gold remains a highly sought-after commodity in India, especially during festivals and wedding seasons, and any fluctuations in price could significantly impact consumer demand.
The Economic Survey’s findings underline the importance of monitoring global economic shifts, commodity market trends, and their implications on India’s financial landscape.
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