Gold and silver prices continue to slide in India from their last week's highs. On MCX, October gold futures prices were today down 0.26% to 38,154, extending their losses to 1,730 per 10 gram after hitting a new high of 39,885 last week. Silver prices also continued their tumble from recent highs. Silver futures on MCX today were off 0.23% to 47,686 per kg, down 3,800 per kg from recent highs of 51,489. Improved risk sentiment has pushed down global gold prices from over $1,550 an ounce to below $1,500, hurting domestic prices. Today gold was trading at $1,491 an ounce in global markets.

"Precious metals (gold) substantially pared gains as expectations rise for a fiscal stimulus from various governments to tackle deceleration in global economic activity," Yes Securities said in a note.

In spot market, gold prices fell 372 to 38,975 per 10 grams in Delhi market, Press Trust of India reported, citing HDFC Securities. Silver prices also tumbled 1,150 to 48,590 per kilogram.

Despite the recent correction in gold prices, many analysts remain bullish on the metal, saying that interest rate cuts from global central banks will support prices. Lower interest rates increase the appeal of non-yielding gold. "We now expect gold prices to trade stronger for longer, possibly breaching $2,000/oz and posting new cyclical highs at some point in the next year or two," Citi bank analysts wrote in a recent note.

Gold traders are awaiting the outcome of Thursday's European Central Bank meeting, which is widely expected to deliver a cut to interest rates. Next week, the US Federal Reserve is also widely expected to cut rates next week amid risks of a global downturn.

"The European Central Bank is expected to deliver additional monetary stimulus when its policy makers meet on Thursday, though some officials have appeared to push back against expectations for an aggressive package of measures combining further interest-rate cuts with a new bond-buying program," HDFC Securities said in a note.

Despite the recent correction in prices, gold is up about 20% so far this year in India. The sharp rally in prices has made investors increase their bet on gold-backed ETFs, which witnessed a net inflow of 145 crore in August - the first such infusion in nine months. This has pushed the latest inflow pushed asset under management (AUM) of gold funds to 5,799 crore in August-end from 5,080 crore at the end of July.

On the other hand, jewellers hope that the recent correction could improve demand ahead of the festive season. High prices has also increased the supply of old jewellery, leading to a sharp decline in gold imports into India in August.

Meanwhile, the government of India's sovereign gold bonds, the last tranche for this fiscal, is currently open for subscription at 3,890 per gram. Those applying online get a small discount. (With Agency Inputs)