Despite gains in gold prices in the international market after the US Federal Reserve's interest rate cut, prices in India were subdued from the rupee's gains.
In the global markets, spot gold and US gold futures were up by 0.3 percent each to $1,499.06 and $1,501.40 per ounce, respectively.
Gold and silver prices in India
In India, gold futures (Dec 2019) on MCX were trading 0.09 percent lower from its previous close at Rs 38,052/10 grams, fluctuating between a high of Rs 38,105 and a low of Rs 38,037.
However, silver futures (Dec 2019) were trading 0.09 percent higher at Rs 46,160/kg.
These rates on MCX were observed at around 11 am on Thursday.
Changes in economic activity continue to dictate gold prices
On Wednesday, post Indian market hours, the US Federal Reserve cut interest rates for the third time this year to help sustain growth in the American economy but said that it does not plan on making more rate cuts unless the conditions worsen.
Gold's appeal improves when the global economy does not look promising. While the metal rose from the rate cut news, its gains were curbed after Fed Chairman Jerome Powell said in a news conference, post the policy meet, that the American economy was doing well, and was likely to continue to do so under the current stance of monetary policy.
Then on Thursday morning, China reported its fifth straight month of shrinking factory activity in October. The official Purchasing Managers' Index (PMI) for manufacturing in the country came at 49.3 in October. PMI readings above 50 mean expansion while below the level indicates contraction.
This data revived concerns of the ill-effects of US-China trade war on the economic activities of the two countries and the world as a whole. Hence, gold prices were still at high levels as investors await the results of trade negotiations between the two largest economies in the world.
Stock market sentiments help the Indian rupee
Asian markets cheered the Fed rate cut. In India, BSE's Sensex jumped 0.69 percent to hit its new record high of 40,328 and NSE's Nifty 50 was up by 0.64 percent to 11,919.
Rupee, which generally moves in the direction of the Indian markets, additionally benefited from a fall in the dollar index.
The dollar index measures the American currency against a basket of six major currencies and was seen trading 0.2 percent lower at 97.42, continuing its decline seen on Wednesday.
The Indian rupee opened higher on Thursday by 0.18 percent at 70.78 a dollar.
A stronger rupee makes gold cheaper for buyers in India as the country is highly dependent on imports for its domestic demand.
Gold consumption falls in China
In China, the world's top producer and consumer of the precious metal, gold consumption fell 9.58 percent on a year-on-year basis to 768.31 tonnes in the first nine months of 2019, China Gold Association said on Wednesday.