• Gold prices in India have fallen in tandem with a pullback in global rates
  • Silver has also mirrored gold’s price trend
  • Gold prices in India continued to weaken from recent highs, following a similar global trend. On MCX, October gold prices were today down 0.3% to around 37,700 per 10 grams, down about 1,000 from their recent highs of 38,666. Silver also followed a similar trend. September silver contracts on MCX were down 0.32% to 43,290 per kg – also down sharply from recent highs around 44,500. In global markets, hopes of stimulus in major economies have tempered anxiety about a global recession, boosting riskier assets and softening gold prices.

    The safe-haven appeal of gold as an asset class goes up during times of uncertainty. In global markets, gold prices held around $1,495 per ounce, after they tumbled 1.2% on Monday, its biggest daily decline in about a month.

    However, many analysts remain positive on gold despite the recent pullback in prices: Accommodative central banks, continuing US-China trade tensions, weaker rupee, and fears of slower global growth will continue to provide support to gold prices, they say.

    Gold investors will be focusing on this week US Federal Reserve’s Jackson Hole symposium for greater clarity on the future path of interest rates. Lower interest rates brings down the opportunity cost of holding of non-yielding asset classes like gold and weigh on the dollar, making gold cheaper for investors holding other currencies.

    Back in India, record high prices, coupled with a rise in import duty and slowing economic growth, have dampened demand. Gold futures prices are up around 20% in India since the start of the year, in tandem with overseas spot gold, which has rallied to a six-year high.

    Gold imports into India, which meets almost all its requirements through imports, fell over 40% this July to $1.7 billion. A fall in gold imports has helped India narrow trade deficit to $13.4 billion for the month of July, much lower than monthly run rate of about $15 billion over the past three months, according to analysts.

    Heavy rains that have caused floods in some of the biggest gold-buying states such as Kerala and Karnataka have also hurt demand. If gold prices remain high during the forthcoming festive season, it could be a dampener for sales in India, say analysts.

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