Investment in equity markets in India has benefited them modestly, while in contrast to the prime benchmark indices such as Nifty 50, Sensex, and Bank Nifty, gold turned out to be an outperformer in the performance.

The Nifty 50 footed nearly 8.5% increase during the year to date (YTD), while the BSE Sensex gave 8% return. The Nifty Bank index only managed a pathetic gain of 5.25% in the year 2024.

In India, MCX gold price surged by around 21% in this year, while the spot gold price increased by nearly 27%.

Key Factors Behind Gold's Outperformance

Experts say that various reasons have caused the gold to outperform, even as the stock indices languish in high volatility and uncertainty. Some of the important triggers that prop up gold include talks about US Federal Reserve rate cuts, increasing geopolitical pressures, rising central bank gold purchases, and roaring investors' appetite. And, as if that was not enough, the homecoming of Donald Trump into the White House and the possible intensification of the trade war also provided fuel in gold's rise.

According to Anuj Gupta-the Head of Commodity & Currency at HDFC Securities-gold returned outperformance due to various factors such as geopolitical crises, increased gold buying by central banks, and escalating trade war tensions ignited by Trump's victory in the US Presidential Election. "MCX gold outshined all the other regulated assets by huge difference in 2024," he added to those reasons that earth created very suitable conditions for gold as the atmosphere took a swing in Favor of money as compared to other equity wealth.

Explaining this, Sugandha Sachdeva, Founder, SS Wealth Street, said gold touched an all-time high of $2,790 per ounce in international markets and a record Rs.79,775 per 10 grams in domestic markets. With returns globally around 27% and domestically more than 20%, gold is believed to have performed beyond most asset classes, including equities.

Crucial Reasons Gold performance in 2024

1. US Fed Rate Cut: Once again, it is the monetary easing of the US central bank, the Federal Reserve, that gives a big and pleasant boost to gold prices as inflation wanes. The stimulus on gold demand was brought about by the early announcement of, and later the actual, rate cuts as a response to inflation. When interest rates are lower, gold, which doesn't provide interest or dividends, becomes more interesting as an investment alternative.

2. Geopolitical Tension: Heightened tensions worldwide like that of the Israel-Hamas conflict; that of Russia and Ukraine and, much more recently, that of Syria is inspiring gold to be a more attractive option for putting one's money. Generally, in bad times- the tendency of investors is to flock to gold, normally regarded as a store of value, which pushes the price even higher.

3. Central Bank Gold Buying: In addition to the 694 tons of gold by central banks in emerging markets in the third quarter of the year 2024, they are anticipated to keep accumulating gold due to the copious buying that has, against expectation, reached the level it was during hoarding in 2022, hence structurally supporting gold prices. Thus, present continuous strong trend diversifying reserves into gold will do lots of good for central banks to boost their performance in the metal.

4. Rising Investment Demand: Renewed interest in gold-backed Exchange Traded Funds (ETFs) is accompanied by the increase in gold prices. After months of exodus, gold ETFs have attracted net inflows of $2.6 billion YTD during the year 2024. This open window reflects increasing confidence among investors regarding the metal, which has turned into a preferred asset in uncertain times.

5. Escalation in Trade War: The ever-increasing national debt of the US has recorded an all-time high of $34 trillion, and the upcoming rise in trade war tensions, which in itself further cements gold as a safe haven. Most investors, as they see potentially unfavourable long-term implications of this fiscal instability, have resorted to menacing inflation and currency fluctuation through protection by retaining gold reserves.

What Lies Ahead for Gold?

As the year 2024 draws to a close and transitions into the new year in January 2025, analysts point out that gold will most likely still serve as an inflation hedge-for a while. But then again, there are possible competing factors, such as rising US Treasury yields, fluctuations in the foreign exchange market, and the growing preference for digital assets such as Bitcoin. For both gold and equities in 2025, however, the critical determinant is the 'Trump factor'. If under Donald Trump the trade war tensions get worse than they already are, as some observers predict, then gold and stock markets are likely to experience extreme volatility.

Conclusion

As Christmas 2024 comes near, the time when gold rose very much higher than the major Indian stock indices like Nifty 50, Sensex, and Bank Nifty will come to an end. While equity markets perform averagely, gold has performed better, producing great returns on the market due to a mixture of macroeconomic and geopolitical reasons. US Fed's rate cuts-increasing global tensions-central banks purchasing gold at a staggering rate-increased investor appetite-gold has been a robust historic asset in bad times.

What it has done this time around has happened to gold naturally. It has increased by around 20 percent in domestic markets and by nearly 27 percent internationally, thus re-establishing its appeal as a store of value in the future. Through 2025, gold will probably resume fulfilling its role as an inflation hedge, competing, however, with climbing US Treasury yields, currency fluctuations, and digital assets like Bitcoin. There will be major catalysts of gold and equity markets and, by the look of things, significant volatility in the initial year with the ongoing trade war and "Trump factor".

That is all there is to it: gold indeed performed admirably in 2024. Gold, therefore, remains an asset for most investors in search of much-needed shelter in hard times. Whether gold can carry this over into 2025 is another question, but it is safe to say that, at the moment, gold is easily the asset of the year.