Bullion boom isn’t over yet! Which metal deserves more of your money now - Gold or silver?

The article highlights a significant surge in bullion prices in 2025, with gold rising over 60% and silver nearly 120%, driven primarily by global uncertainties and increased central bank buying. This phenomenon is not merely an investment trend but a reflection of deeper economic and geopolitical forces at play, with profound implications for India.

To understand this 'bullion boom,' we must first grasp the background context. Gold and silver have historically served as safe-haven assets, meaning investors flock to them during times of economic instability, geopolitical turmoil, or high inflation. Unlike paper currency, which can lose value due to inflation or government policies, precious metals are considered stores of value. The period leading up to 2025 likely saw a confluence of factors such as persistent inflation concerns, supply chain disruptions, escalating geopolitical tensions (e.g., conflicts, trade wars), and perhaps even fears of a global economic slowdown or recession. These uncertainties create a 'risk-off' environment, where investors shift away from riskier assets like equities and towards perceived safer options like gold and silver.

The article specifies two major drivers for the 2025 rally: global uncertainties and central bank buying. Global uncertainties, as discussed, fuel retail and institutional investor demand. Central bank buying is particularly significant. Central banks, including the Reserve Bank of India (RBI), hold foreign exchange reserves, which traditionally include a mix of foreign currencies, government bonds, and gold. In recent years, many central banks have been increasing their gold holdings to diversify reserves, hedge against currency volatility (especially the US Dollar), and protect against inflation. This institutional demand provides a strong floor for gold prices and signals a long-term confidence in the metal. The distinction between gold as a 'core hedge' and silver for 'tactical growth' suggests that gold is seen as a stable, long-term wealth preservation tool, while silver, with its industrial applications alongside its precious metal status, offers higher volatility and potential for quicker, albeit riskier, gains.

Key stakeholders in this bullion market include individual retail investors seeking to protect their savings, large institutional investors (like pension funds and sovereign wealth funds) looking for portfolio diversification, central banks managing national reserves, and mining companies whose profitability directly correlates with metal prices. The jewellery industry is also a major stakeholder, as higher prices can impact consumer demand, especially in price-sensitive markets. Governments, particularly in gold-importing nations like India, are also key players due to the impact on trade balances and revenue from import duties.

For India, the significance of a bullion boom is immense. India is one of the world's largest consumers and importers of gold, driven by its deep cultural and traditional significance. Gold is an integral part of weddings, festivals, and religious ceremonies, and is often considered a primary form of household savings, particularly in rural areas. Economically, high gold prices combined with increased demand can significantly worsen India's Current Account Deficit (CAD), as the nation spends billions of dollars on gold imports, draining foreign exchange reserves. The government has attempted to address this through schemes like the **Gold Monetisation Scheme (GMS)**, launched in 2015, which aims to mobilize idle household gold, and the **Sovereign Gold Bond (SGB) Scheme**, also launched in 2015, which allows investors to buy gold in paper form, reducing demand for physical imports. The RBI, under the **Reserve Bank of India Act, 1934**, manages the country's foreign exchange reserves, including gold, and its buying activities directly influence the global market.

Historically, India has always had a strong affinity for gold. From ancient times, gold was a symbol of wealth and status. Post-independence, various governments have grappled with managing gold imports and their impact on the economy. The liberalization policies of the 1990s eased restrictions, leading to increased imports. The current policies, including GMS and SGB, are modern attempts to leverage this cultural preference while mitigating its adverse economic effects. The **Foreign Exchange Management Act (FEMA), 1999**, governs all foreign exchange transactions, including gold imports, while the **Customs Act, 1962**, empowers the government to levy import duties.

Looking ahead, the future implications of continued bullion rallies are multifaceted. For India, it could mean persistent pressure on the CAD, potentially leading to further government interventions to curb physical gold demand or promote alternative financial instruments. Globally, sustained high prices could signal ongoing economic instability, higher inflation expectations, or continued geopolitical fragmentation. Central banks might continue to diversify away from traditional reserve currencies, further boosting gold's appeal. Investors will need to carefully balance the hedge benefits of gold with the growth potential and volatility of silver, always keeping an eye on global economic indicators and central bank policies.

In essence, the bullion boom of 2025 is a complex interplay of global economics, investor psychology, and national policies, with a particularly resonant impact on India's economy and society.