Improved risk sentiment in global market hurt the safe-haven appeal of gold
The rupee has also pulled back from recent lows
Gold and silver prices fell sharply today in tandem with a decline in global prices. On MCX, October gold futures prices fell 1% to ₹39,422 per 10 grams, after they hit a new high of ₹39,885 on Wednesday. Silver futures also fell sharply today, with prices slumping 1.7% to ₹50,523 per kg. Silver futures prices had also hit a life-time high of ₹51,489 in yesterday's session on MCX. In global markets, gold prices today fell 0.5% to $1,544.45 an ounce as risk sentiment improved.
In a sign of improved risk sentiment, Asian stock markets jumped today after China said it will hold trade talks with the US in early October, raising hopes they can de-escalate their trade war. This hurt the safe-haven appeal of gold.
Also hurting gold prices and improving risk sentiment, Hong Kong leader Carrie Lam said she was withdrawing an extradition bill that had triggered months of often violent protests in the Asian financial hub.
Also, the British parliament on Wednesday voted to prevent Prime Minister Boris Johnson taking Britain out of the European Union without a deal on October 31. "Global risk sentiment has improved after we saw some diffusion in tensions," forex advisory IFA Global said in a note.
The rupee has pulled back from its year lows, hit on Tuesday. A weaker rupee lifts the price of gold in India as the country meets most of its requirement from imports.
In global markets, gold prices are up about 20% so far this year as US-China trade tensions, dovish policy stance from major central banks and global slowdown have lifted the safe haven of the yellow metal. Inflows into gold-backed ETFs have also seen strong inflows.
Silver prices have also shot up over the past few months, leading some analysts to turn cautious. "Weighing on silver price is weakening demand outlook amid slowdown in industrial activity in major economies. Silver has been on an upward path for last few weeks however the recent gains are not supported by fresh factors and one needs to be cautious in building fresh long positions," Kotak Securities said in a note.
Back in India, record high gold prices have put pressure on demand. India's gold imports slumped over 70% in August, Reuters reported, citing sources. The domestic gold price in India includes a 12.5% import tax and 3% GST.