New Delhi: Gold prices slumped today in Indian markets amid a soft trend overseas. After crossing record 40,000 mark on Thursday, gold price declined 500 to 39,720 per 10 gram, Press Trust of India reported, citing All India Sarafa Association. Silver prices also dropped 450 to 48,600 per kg. An appreciation in the rupee's value against the US dollar also weighed on gold and silver prices. The rupee rose 38 paise today to close at a two-week high of 71.42 against the US dollar.

Prices of gold of 99.9% purity fell 500 to 39,720 per 10 gram while that of 99.5% purity fell 520 to 39,530 per 10 gram, Press Trust of India reported. Silver ready declined 450 to 48,600 per kg, while weekly-based delivery slumped 440 to 46,790 per kg.

In global markets, gold prices dipped to $1,525.06 per ounce as the trade tensions between world's two biggest economies eased slightly after both the countries indicated they may resume talks to resolve their protracted trade conflict. Global equity markets rose in response to the potential softening in the China-US trade war.

The development related to US-China trade war will continue to be in focus for gold traders, say analysts.

"Stability in equity market amid signs of reconciliation between US and China has led to some profit taking in gold," says Kotak Securities in a note.

"Correction in gold price also caused ETF investors to exit. Gold holdings with SPDR ETF fell by 2.05 tonnes to 830.359 tonnes, first decline in nine trading sessions," it added.

Many analysts expect the US Federal Reserve to go in for a quarter-point cut in interest rates next month, and over 100 basis points of easing by the end of next year.

Data on Thursday showed that German inflation slowed in August and unemployment rose, cementing expectations of a new ECB stimulus package next month. Christine Lagarde, the European Central Bank's next president, indicated on Thursday that the bank still has room to cut interest rates if needed. Lower interest rates boost the appeal of non-interest yielding gold.

Gold prices are likely to remain supported in near term, say analysts. "US and China’s stance on trade has been very fickle and although we have seen some positive reaction, market confidence remains low that the issue may be resolved soon. Supporting gold price is concerns about health of major economies amid mixed economic data, persisting trade worries, Brexit uncertainty and loose monetary policy stance of central banks," Kotak Securities added.

Back in India, high prices have impacted demand of gold, which is up around 25% in futures markets so far this year. A global rally, weakening rupee and the hike in import duty have lifted gold prices this year. Jewellers have also reported an increase in supply of old jewellery. (With Agency Inputs)

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