Slight pressure on prices

On MCX, gold futures ended 0.88 percent or Rs 341 lower at Rs 38,553 per 10 grams from its previous day's close and Rs 1,332 less than its all-time high. Silver futures ended 3.18 percent or Rs 1,573 lower at Rs 47,885 per kilo on Friday, which is a significant Rs 3,604 fall from its all-time high.

At the start of this week, both gold and silver prices hit their all-time high at Rs 39,885/10 grams and Rs 51,489/kg, respectively in the Indian futures market.

Improved global economic outlook and a slight recovery in the Indian rupee's strength put pressure on prices of these metals.

Influenced by global trends

For the last few weeks, the precious metals market has become a favourite among investors looking to averse risk amid the uncertainties around US-China trade war, Brexit and other Geo-political tensions that ignited concerns of a slowdown in global economic activity.

Gold and silver prices in India are also highly influenced by global trends.

In the US, spot gold ended 0.86 percent lower at $1,505 an ounce on Friday and silver fell 3.24 percent to $17.97. Federal Reserve Chair Jerome Powell's optimistic remarks and planned resumption of trade talks between the US and China and strong American economic data re-ignited some appetite for riskier assets, pushing gold prices lower.

Powell said that the weaker-than-expected US non-farm payroll report was consistent with a quite strong labour market at a panel session in Zurich. He further said that despite all the trade uncertainties, he does not foresee or expects a recession in the US.

Is this trend temporary?

Spot gold has risen 17.6 percent in 2019, but is demand dying?

Many experts attribute the recent fall in prices to profit-taking after the new highs seen earlier this week. They believe that it may not be a reversal in trend but just a break in the upward trend.

"One move lower like what we saw on Thursday is not going to change the overall trend and what central banks are doing with interest rates, which over time is going to push gold higher," said Bob Haberkorn, senior market strategist at RJO Futures told Reuters.
Various major central banks, including India's RBI, have been easing their policy stance. The US Fed recently made a 25-basis-points cut in its rates and more cuts are being expected from RBI as well the US Fed amid weak economic data releases.

Gold, as well as silver prices, are sensitive to these policy rate cuts as it lowers the opportunity cost of holding non-yielding metals, like the bullion.

May cross Rs 40,000 again

As for the Indian markets, consumers tend to bet on the metals in an upward trend. With festival and wedding season coming up, buyers are likely to see the Rs 40,000/10 grams-of-gold-rate at jewellery stores once again.

Further, the Indian rupee is expected to remain weak, which adds to the gold's already high prices, as it is imported in US dollar terms.

In a recent Reuters poll, strategists said that they do not see the rupee regain its lost momentum against the US dollar in the coming year and believe that the recent rollback of surcharge on foreign investors will have no impact on the currency.

The rupee has lost close to 6 percent since 5 July, the day of Union budget presentation, where the later withdrawn surcharge on FPIs was imposed.

There was no improvement seen in the currency after the decision was reversed by Finance Minister Nirmala Sitharaman. In fact, the rupee touched its lowest value in 2019 at 72.40 per dollar on 3 September.