Gold price drops to Rs 49,117 per 10 gm; silver price at Rs 51,355 per kg

Gold rices on Wednesday dropped to Rs 49,117 fom Rs 49,247 per 10 gram while silver prices fell Rs 438 to settle at Rs 51,355 per kg, according to Indian Bullion and Jewellers Association.

Gold jewellery prices vary across India, the second-largest consumer of the metal, due to excise duty, state taxes, and making charges.

In New Delhi, the price of 22-carat gold rose to Rs 47,750 per 10 gram. 24-carat in the national capital was retailing at Rs 48,950. In Chennai 22-carat traded at Rs 46,910 while the price of 24-carat gold prices in Chennai was at Rs 51,170. In Mumbai, the rate was Rs 47,920 for 22 carat gold, according to the Good Returns website.

On MCX, gold prices climbed 0.21% to ₹49,252 per 10 gram. Gold has struggled to extend gains after hitting record high of ₹49,348 earlier this week. Silver prices however edged lower today on MCX. Silver futures on MCX fell 0.75% to ₹52,650 per kg. Weighing on gold prices are concerns about consumer demand with prices rising to record highs, say analysts.

MCX received the approval of Sebi for the launch of Gold Mini options with Gold Mini (100 grams) bar as underlying, MCX said in a statement.

Meanwhile, investment in gold is likely to make up for the fall in consumption demand for the precious metal, as per a report by the World Gold Council (WGC).

The report titled 'Gold Mid-Year Outlook 2020' noted that in the current global economic environment, three factors are supportive of investment demand for gold -- high risk and uncertainty, low opportunity cost and positive price momentum.

An economic contraction is likely to result in lower demand for gold in the form of jewellery, technology or long-term savings, it said, adding that this is particularly evident in key gold markets such as China and India.

"Investment demand during periods of financial stress has offset weakness in consumer demand and we believe that 2020 will be no exception. However, gold's performance may depend on the speed and shape of the recovery," the report said.

In terms of India, the report said that in the second half of the year, the consumer demand is likely to remain soft due to reduced economic activity, concerns about increasing unemployment, and income erosion. However, additional economic packages from the government and a likely positive monsoon season could help soften the negative impact of an economic deceleration.

"Additionally, we expect investors to turn to gold as a means of hedging as we have seen in the first half of this year," it said.

The WGC report observed that although central banks around the world have aggressively cut rates and expanded asset purchasing programmes to stabilise and stimulate their economies in view of the pandemic, these actions are leading to several unintended consequences on asset performance.

In the international market, gold solidified gains above $1,800 an ounce. Gold prices inched up, rising above the $1,800 level, underpinned by concerns over the mounting coronavirus cases globally and as many regions reintroduced curbs to restrict the outbreak.

US gold futures settled mostly unchanged at $1,813.40. Spot gold rose $7.1051 to $1,809.81 an ounce.

Fear can influence gold, said Kristina Hooper, chief global market strategist at Invesco in New York.

"On days when stocks are up and gold is up, part of the story is the Fed has made stocks attractive to investors, but there is apprehension that is driving up gold prices as well," Hooper said.