Outlook 2024: What are the expectations from the yellow metal and gold loan market?

The performance of the precious yellow metal has been impressive, showing a gain of more than 12% this year, and on India’s Multi Commodity Exchange (MCX), gold’s trading value recently stood at a staggering ₹61,221 per 10 grams (as of December 11, 2023). 

A recent report by the World Gold Council (WGC) highlights that gold’s performance has been bolstered by various global events including the collapse of the Silicon Valley Bank, an approaching election year for major economies such as the US, the EU, India, and Taiwan, and the continued demand from central banks. After a roaring 2023, questions emerge about what can be expected of the gold and gold loan market in 2024.

The gold market

Gold is often viewed as a safe-haven asset. In times of anticipation of a global economic downturn, investors’ need for portfolio hedges will surpass normal levels, further fueling demand for the yellow metal. In its report, the WGC estimated that central bank demand added 10% more to gold’s performance throughout the year, and this trend is expected to continue. Ongoing geopolitical tensions, expectations of rate cuts, and concerns over the health of major economies are likely to support gold prices in the coming year. 

In the current year, the bullion market is experiencing an overbought scenario for gold on the MCX, marked by a sustained and singular upward surge spanning almost a fortnight, propelling the precious metal from 56,500 to 60,600. Throughout the year, this trend is expected to continue. 

In India, which is the second largest gold-consuming nation in the world, factors such as a weak rupee, firm overseas prices, and a steady demand from the physical and jewellery market might further push demand for the precious metal, with an expected range of ₹57,500 - ₹65,000 in 2024.

India’s gold loan market

With India's gold loan market mirroring the exceptional performance of the commodity market, an upsurge in loan volumes is anticipated. The demand for safe-haven assets and the increasing value of gold are driving this trend, especially in rural areas where gold serves as a readily available source of credit. Though 65% of the market remains unorganised, India’s gold loan market is estimated to grow at a CAGR of 15%-20%. 

The gold loan sector has also seen a rise in fintech companies, leveraging advanced technologies like AI and data analytics for improved risk assessment and a streamlined loan approval process. In the upcoming year, the entry of new players is expected to accelerate this transformation in the gold loan market.

To sum up, in the coming year, India's gold market outlook remains positive due to rising prices, safe-haven appeal, and increased demand from various central banks. The gold loan market is set for further growth, driven by technological innovation, government initiatives, and the sustained increase in per-gram gold rates. 

Vijay Malhotra, Co-founder & Chief Sales Officer SahiBandhu Gold Loans