Gold prices today fall sharply after hitting new high but silver rates rise

Gold prices fell today after hitting a new high but silver prices continue to rise in India. On MCX, October gold futures prices today were down 0.61% to ₹39,436 per 10 gram, after hitting a new high of ₹39,770 earlier in the session. Silver rates on MCX today hit on another new high of ₹51,425 per kg but later pared some gains and traded 0.7% higher at ₹50,925. In global markets, expectations of deeper rate cuts by the US Federal Reserve have pushed gold and silver prices sharply higher this week. Traders are betting on multiple round of rate cuts from the US Federal Reserve after US manufacturing output shrank in August for the first time in over three years, according to the Institute for Supply Management's Purchasing Managers Index (PMI), stoking fears that the global economic slowdown has reached American shores.

Lower interest rates boost the appeal of holding non-interest yielding assets like gold. Gold prices rose over 1% in global markets on Tuesday while silver prices surged 4% breaching the $19 mark for the first time since October 2016.

The US imposed new tariffs over this weekend and hopes appear to be dimming that the world's two largest economies will reach a near-term resolution to their long-running trade war.

Global financial services major BNP Paribas has forecast that gold prices could surge above $1,600 an ounce on the back of potential rate cuts from the Federal Reserve. Gold prices have soared this year on increased safe-haven demand as the US-China trade war drags on. The US Federal Reserve in July cut interest rate for the first time in more than a decade, and it is expected do so again at its September 17-18 meeting.

BNP Paribas analysts expect the Fed to go for four, 25 basis point cuts between this month and June 2020 to combat slowing growth. The Fed’s easing cycle could push average prices of gold above $1,600 in the first quarter of 2020, BNP Paribas analysts said.

Indicating increased safe-haven appeal of gold, inflows into bullion-backed exchange-traded funds topped 100 tons in August - the highest in over six years. Holdings of gold-backed ETFs rose 101.9 tons, bringing total assets to 2,453.4 tons, according to Bloomberg data.

Back in India, record high gold prices have hurt gold demand. A Reuters report, quoting sources, said that India's gold imports in August plunged 73% from a year ago to the lowest level in three years. Analysts say that lower imports into India, the world's second biggest consumer, could cap gains in global prices. (With Agency Inputs)