Gold Prices Fall Today After Sharp Rise, Silver Edges Higher

(October 9, 2019 - Staff Writer of LiveMint, India)

• A higher rupee weighed on domestic gold prices
• Higher prices could dampen the festive demand for gold

Reversing early gains, gold prices in India edged lower today. On MCX gold futures today fell 0.20% to ₹38,310, after rising to ₹38,574 at day's high. Gold had gained ₹268 on Tuesday. Silver futures on MCX gave up some gains but still traded 0.15% higher at ₹45,943. However, in spot markets, gold prices rose ₹315 to ₹39,325 per 10 grams in Delhi market, Press Trust of India reported. Silver was trading up by ₹1,010 to ₹47,330 per kg.

In global markets, spot gold rose 0.1% to $1,505.95 per ounce. US visa restrictions on Chinese officials and addition of more Chinese companies to a US trade blacklist ahead of trade talks weighed on hopes that the two countries could resolve the trade spat.

In global markets, gold prices have risen 17% as weak global growth, US-China trade spat and easing of monetary policy by central banks have increased the safe-haven appeal of gold. Rising inflows into bullion-backed ETFs has also supported the price. Holding of gold-backed ETFs are now just less than 35 tons away from a record set in 2012, Bloomberg reported.

Gold is a beneficiary of lower interest rates and when investors shun risk.

Federal Reserve Chairman Jerome Powell hinted on Tuesday at the possibility of another interest rate cut after a report showed the growth in the vast US services sector is slowing. Data released earlier this week showed an US factory activity contracting to its lowest level in more than a decade.

Kristalina Georgieva, the new IMF chief, on Tuesday warned that the global economy is experiencing a "synchronized slowdown and said that it could worsen if governments failed to resolve trade conflicts and support growth.

The Citigroup has stuck to its forecast of gold rallying to $1,700 an ounce over six to 12 months, saying that slowdown in global trade is starting to bite the U.S. economy.

"Gold may continue to trade in a range near $1500/oz unless we get more clarity on US-China trade talks and Fed’s monetary policy however the general bias may be on the upside owing to global growth concerns and geopolitical issues," Kotak Securities said in a note.

In India, apart from the rupee-dollar exchange rate, the domestic price also includes a 12.5% import tax and 3% GST. The increase in domestic prices from last week's lows of ₹36,800 has sparked fears that demand could be hit this this Dhanteras.

The government has also launched gold bonds to coincide with the festive season. The 2019-20 Series V gold bonds, which is open for subscription, will close on October 11. Another tranche of gold bonds, 2019-20 Series VI, will open for subscription on October 21. (With Agency Inputs)