Precious metals started the New Year trading session on a strong note, with both gold and silver posting significant gains on the Multi Commodity Exchange (MCX). Gold February futures opened higher by ₹1,195 at ₹1.36 lakh per 10 grams and held most gains through the session, closing up ₹795 or 0.59% at ₹1.36 lakh per 10 grams. Silver displayed an even more impressive performance, with March futures opening ₹3,168 higher at ₹2.39 lakh per kg and surging to close at ₹2.42 lakh per kg, marking a substantial gain of ₹6,133 or 2.60%.

Strong Performance Across Contract Months

The rally extended across different contract months, with gold April futures also trading higher by ₹721 or 0.52% to ₹1.40 lakh per 10 grams. Silver March contract touched an intraday high of ₹2.43 lakh per kg, demonstrating robust buying interest and steady momentum that carried forward from the record-breaking performance in the previous year.

International Markets Show Continued Strength

The domestic rally mirrored positive sentiment in international markets, where precious metals began the year on a strong footing globally. Gold and silver are extending their historic gains from the previous year amid persistent geopolitical tensions and expectations of lower interest rates in the US. Market participants point to a combination of international cues and local demand as key drivers for the current momentum.

Federal Reserve Policy and Market Dynamics

Minutes from the US Federal Reserve's December meeting reinforced expectations that policymakers could ease monetary policy if inflation continues to cool, although differences remain on the timing and pace of rate cuts. Lower interest rate expectations typically support non-yielding assets such as gold and silver, providing fundamental support for the current rally.

The supportive monetary policy environment, combined with continued central bank buying and a softer dollar, has created favorable conditions for precious metals. Geopolitical risks have also stayed elevated, with renewed tensions in Eastern Europe and tighter enforcement actions impacting global energy and trade flows, sustaining safe-haven demand for precious metals.

Market Outlook and Investment Perspective

Market analysts believe that most commodities, including precious metals, are likely to extend gains with the supportive global macro environment. The combination of firm spot demand, expectations of lower US interest rates, and persistent geopolitical uncertainties continues to underpin the bullish sentiment in precious metals markets.

The strong start to the New Year suggests that the momentum from the record-breaking previous year performance is carrying forward, with both gold and silver demonstrating resilience and attracting steady buying interest from investors seeking portfolio diversification and safe-haven assets.

Bank loans against gold have emerged as the fastest-growing credit segment, surging 125% year-on-year to reach ₹3.50 lakh crore by November 2025, according to Reserve Bank of India data. This remarkable growth has been fueled by a significant rally in gold prices and the metal's enhanced collateral value, enabling borrowers to secure larger loans against their holdings.

Gold Price Rally Drives Loan Growth

The surge in gold loans coincides with a substantial price appreciation in the precious metal. Gold prices rose nearly 64% during 2025, reaching approximately ₹1.35 lakh per 10 grams of 24-karat gold. This price rally has directly translated into higher collateral values, making gold loans more attractive to both lenders and borrowers.

The growth trajectory of gold loans has been particularly impressive over recent periods:

Market Share Dynamics Shift

A notable development in the gold loan market has been the changing competitive landscape between banks and non-banking finance companies. Banks have now overtaken NBFCs in market share, holding 50.35% of the gold loan market, with the remainder accounted for by finance companies, according to RBI's latest Trends and Progress report.

Non-banking finance companies have also expanded their gold loan portfolios, with outstanding loans reaching ₹3.00 lakh crore according to industry estimates. Major players in the gold loan financing space include Muthoot Finance, Manappuram, and IIFL Finance.

Structural Credit Access Changes

"The sharp growth in gold loans reflects a structural shift in how small entrepreneurs and households access credit," said Manish Mayank, head of gold loan business at IIFL Capital. He emphasized that gold loans meet urgent, short-tenure working capital needs with speed, transparency, and minimal documentation requirements.

The secured nature of gold loans has created advantages for both parties involved:

• For lenders: Lower risk profile due to tangible collateral
• For borrowers: Affordable and flexible credit access
• Operational benefit: Minimal disruption to existing cash flows

Broader Credit Market Performance

While gold loans dominated growth, other credit segments showed varied performance. Vehicle loans climbed to ₹6.80 lakh crore by November-end, supported by GST cuts and festive offers, registering 11% growth. However, consumer durable loans contracted, likely due to the conclusion of festive season demand in October.

The combined gold loans of banks and NBFCs represented a 5.8% share in total outstanding loans as of September-end, according to RBI's Financial Stability Report. Trade sector credit showed the strongest growth at 14%, reaching ₹12.30 lakh crore, supported by government and RBI relief measures including loan moratoriums for exporters until December.