Commodity Talk: Gold may lose luster in near term after Trump takes office, says MOFSL’s Manav Modi

Historically, safe-haven assets have taken a hit, at least in the first few months after a Republican leader takes over the US presidency. Manav Modi, Analyst, Commodity Research, Motilal Oswal Financial Services (MOFSL). President-elect Donald Trump has made several promises that could add to market volatility that could in turn support the dollar lower, he added.

Will gold, which outperformed India’s heartbeat indices Sensex and Nifty in 2024, continue its momentum in 2025 and what is the target for the yellow metal?
Gold saw an impressive rally in 2024, rising more than 20% on the COMEX through September. The surge followed a period of pandemic-driven economic uncertainty and was driven by several key factors, mainly central bank policies and geopolitical tensions. Additionally, a range of other dynamics, such as supply-demand imbalances and domestic market conditions, have influenced the price movements of these metals. At some point in 2024, safe-haven and risky assets moved together. However, despite the intense volatility, the former performed well. By October 2024, gold and silver prices had seen significant gains, fueled by war escalation, high expectations of rate cuts and overall demand.

However, in its wake, volatility in the dollar index, the prospect of easing Middle Eastern tensions, and the victory of US President-elect Trump weighed on prices, easing gains from higher levels. Historically, safe-haven assets have taken a big hit after a Republican leader takes over the US presidency, at least in the first few months. This tug-of-war and volatility in both risky and safe-haven assets may continue into 2025.

If Donald Trump takes office as US President, what does it mean for commodity markets given his protectionist tendencies?
President-elect Donald Trump has made several promises that could add to market volatility. He has proposed extending tax cuts and levying tariffs on China and other nations with the aim of “making America great again.” These moves could support the dollar lower. However, despite having a majority in the Senate, it will be crucial to see how President-elect Trump addresses key economic challenges such as rising debt, fiscal and monetary policies, Middle East tensions and other issues while implementing his agenda.

The first quarter of 2025 may be a bit dull for the major commodity, but the second half of the year may bring some positive momentum, which will help drive this recovery.

China will continue to be an important factor in the way the world consumes commodities, so where do you see the most action – oil, base metals or bullion?
China has disappointed market expectations in 2024, although it is notable that officials from the People’s Bank of China (PBoC) have been repeatedly announcing measures to support the economy. These measures include several stimulus initiatives, rate cuts and other actions aimed at boosting the economy and supporting the affected sectors. While these measures have not yet been reflected in economic data, any significant recovery could lead to a sharp recovery in industrial metals, including silver. This, in turn, could also boost demand for crude oil, supporting prices.

With the budget almost a month away, what are your expectations from the government for this sector?
In the previous budget, customs duty on both gold and silver was reduced from 9% to 6% (including 1% AID cess). There are no big expectations in this budget that could impact the commodity segment.

We are seeing a lot of regulatory action in the equity markets so what are your expectations from SEBI in the new year?
In a recent announcement, the Securities and Exchange Board of India (SEBI) has mandated that only one weekly option contract per exchange will be allowed from November 20, 2024, so there are expectations that local commodity exchanges may also start closing weekly options.

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