Gold outshines all asset classes in FY25, demand hits 15-year high; what lies ahead?

Fueled by its safe-haven appeal amid rising geopolitical and macroeconomic uncertainty, gold emerged as the top performing asset in FY25. However, over longer periods, Indian stocks have yielded superior returns, solidifying their importance for wealth accumulation. Over the past 20 years, the Nifty50 has delivered a 13% annualised price return and a 14.4% total return (including dividends), outstripping gold’s returns across comparable periods, as per latest monthly report by NSE.

The yellow metal has delivered a 41% return in dollar terms and 33% in rupee terms in FY25, closing the year at record highs of over $3,125 per ounce (₹88,946 per 10 grams), NSE said in its “Market Pulse” report. Last week, Gold prices surged to ₹1 lakh per 10 grams in the retail market. 

Demand hits record high in 2024

Global gold demand rose to 15-year high of 4,974 tonnes in 2024—its highest level since 2009—driven by rising geopolitical uncertainty and the growing need to diversify portfolios and reserves. The surge was led by robust investment demand in the form of gold bars and strong central bank purchases for the third consecutive year. In contrast, jewellery consumption has slowed in recent years due to elevated prices, with its share in total demand falling to 38% in 2024 from 46% in 2021—well below the 50% average seen during 2010–2019.

As per the NSE data, globally, central banks purchased 1,045 tonnes of gold in 2024—their third consecutive year of buying over 1,000 tonnes, more than twice the 2010–2021 annual average of 473 tonnes. This marked the 15th straight year of net purchases, with gold now accounting for 14% in the global forex reserves. “The trend reflects both heightened geopolitical and macroeconomic risks and a strategic shift—especially among emerging market central banks—toward reserve assets that offer liquidity, inflation protection, and no counterparty risk. Over the past three and ten years, China, Poland, and India have led gold accumulation among EMs.”

RBI deepens gold reserves

India continued its steady gold accumulation in 2024, with the RBI adding 73 tonnes—over four times its 2023 purchases—taking total holdings to 876 tonnes. Accumulation was consistent through the year, except in December when reserves remained unchanged. The RBI ranked as the third-largest official sector buyer in 2024, behind only China and Poland—a position it has consistently held over the past three- and five-year periods. Gold now accounts for nearly 11% of India’s total foreign exchange reserves, up from 5.4% in 2015, reflecting a deliberate effort to diversify and strengthen reserve resilience. 

Brighter outlook amid persistent global uncertainty

Gold entered 2025 with strong momentum, extending last year’s rally supported by record central bank purchases and rising institutional interest via exchange traded funds (ETF). In Q1 2025, physically backed gold ETFs saw net inflows of $21 bn (226 tonnes)—the highest in 19 quarters and second only to Q2 2020’s post-pandemic surge. The rally was led by rising gold prices, a weakening dollar, and global growth concerns. Alongside ETFs, Sovereign Gold Bonds have gained traction, mobilising 147 tonnes of gold and ₹72,274 crore since their 2015 launch.

Given ongoing geopolitical risks and economic uncertainty, the fundamental factors driving gold demand are expected to persist. Central banks are likely to remain significant long-term buyers as global reserve strategies adjust to an increasingly fragmented economic environment, the report noted.

According to the World Gold Council, while prices may stay range-bound under baseline conditions, asymmetric risks present upside potential. As global reserve strategies evolve in response to a more fragmented world order, sustained central bank buying is expected to remain a key pillar of gold demand in 2025.