On MCX, gold prices dropped 0.74% to Rs 48,796 per 10 gram. Gold has struggled to extend gains after hitting record high of Rs 49,348 earlier this week. Silver prices also edged lower today on MCX. Silver futures on MCX fell 0.85% to ₹52,605 per kg.
Weighing on gold prices are concerns about consumer demand with prices rising to record highs, say analysts.
"In the second half, we expect consumer demand to remain soft due to reduced economic activity, concerns about increasing unemployment and income erosion. However, additional economic packages from the government and a forecasted positive monsoon season could help soften the negative impact of an economic deceleration," said the World Gold Council
(WGC) in the 'Gold Mid-Year Outlook 2020: Recovery Paths and Impact on Performance' report.
"While an economic contraction will likely result in lower demand for gold in the form of jewellery, technology or long-term savings, behavioural changes in consumers will be far more impactful than the economic changes," WGC Managing Director, India, Somasundaram P R told PTI.
Prices have risen by over 50 per cent in two years but incomes have not, therefore, the current prices will be a serious "entry barrier", unless industry breaks this inertia with significant value through various forms of innovation, he noted.
Meanwhile, jewellery retailers are considering their brick and mortar business model and implementing omni-channel approach with an enhanced digital strategy to boost sales, says a WGC report.
The World Gold Council
in a report titled 'Online gold market
in India' said the Covid-19 disruption has caused jewellery retailers India to re-evaluate their existing business model and noted that online retail adoption accelerated during Covid-19 across categories.
In the international market, gold eased on Thursday after the European Central Bank kept its policy on hold, prompting some investors to lock in profits, but worries over mounting cases of the coronavirus and their impact on economic recovery limited bullion's decline.
Spot gold fell 0.4% to $1,804.29 per ounce by 11:10 am EDT (1510 GMT). It hit $1,817.71, its highest since September 2011, last week.
US gold futures fell 0.2% to $1,809.90.
"The key narrative is that central banks are on hold for some time and more stimulus is coming but it's going to be much later. That's taking a little bit of the bullish trend that gold has firmly been in recently," said Edward Moya, senior market analyst at broker OANDA.
Gold, widely considered a hedge against inflation and currency debasement, has risen 19% this year, prompted by massive stimulus measures and low interest rates, although market participants are still divided on the outlook for inflation.
The rise in U.S.-China tensions and an uptick in coronavirus infections in some major economies is keeping gold fundamentally supported, said Kitco Metals senior analyst Jim Wyckoff. "Gold is tied in a trading range of $1,800 and $1,815," said ActivTrades chief analyst Carlo Alberto De Casa, adding that further lockdowns would be positive for gold.