An improvement in risk appetite led investors to shift away from safe-have assets like gold
Silver has suffered higher losses than gold
Gold and silver prices continued their tumble on Friday, amid a softening global trend and appreciation in the rupee. On MCX, October gold futures closed at 0.65% lower at ₹37,503 per 10 gram, extending the fall to the seventh day. That is down about ₹2,400 or 6% from September 4 highs of ₹39,885. Silver prices suffered bigger losses as compared to gold. On MCX, silver futures on Friday ended down nearly 3%, or about ₹1,300 lower, at ₹45,830 per kg. As compared to last week's high of ₹51,489, silver prices are down about 11% or ₹5,659 a kg.
"Correcting 5.64% from the recent peak of 39,885, gold future prices fell for the straight seventh session," Yes Securities said in a note.
Globally, gold prices also fell to a one-month low of $1,483.90 an ounce earlier this week, after hitting an over six-year high of $1,557 last week.
Jewellers hope that the recent price correction in gold prices would spur demand in India, the second largest gold consumer. Reuters reported that dealers were offering a discount of up to $51 an ounce over official domestic prices this week, the highest three years. The domestic price in India includes a 12.5% import tax and 3% GST.
Gold demand in India usually perks up in the October-December quarter due to the wedding season and festivals such as Diwali and Dussehra.
"Moreover, the global scenario is turning favorable towards equity (risky) which is visible from gold’s correction," said Jimeet Modi, founder & CEO of SAMCO Securities & StockNote.
Domestic gold prices also remained under pressure due to rupee's gains against US dollar. A higher rupee makes imports of dollar-denominated gold cheaper. The rupee on Friday ended higher for the seventh straight session on Friday to close at 70.92 per US dollar, as softening crude oil prices and easing US-China trade tensions bolstered investor sentiment.
Analysts say that some deescalation of trade tensions between the US and China led investors to take out money from the safe-haven assets like gold and move towards risk assets assets like equity.
US President Donald Trump said on Thursday he preferred a comprehensive trade deal with China but did not rule out the possibility of an interim pact. US and China had earlier this week announced some tariff concessions ahead of their trade talks next month.
Gold traders will be watching for the outcome of next week's US Federal Reserve meet.
Gold futures on MCX have some support at ₹37,400 while hurdle near ₹39,000, Yes Securities said in a note. "Minor bounce from the support zone is possible" due to the sharp correction, the brokerage said.
On silver, Yes Securities said, prices have broken short-term support levels. "Minor bounce might be there due to oversold reading on intraday charts; however, ₹48,500 could act as resistance zone," the brokerage added.
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