Gold prices in India were marginally higher today but sharply off their record highs hit on Friday. On MCX, August gold futures were trading marginally higher at ₹34,608. On Friday, gold futures hit a record high of ₹35,100, before paring some gains. In Budget 2019, which was presented on Friday, Finance Minister Nirmala Sitharaman increased import duty on gold to 12.5%, from 10%, leading to a spike in domestic gold prices. But record high gold prices could not be sustained amid weak global prices and sluggish demand at higher levels.

Dealers in India, the world’s second biggest gold consumer after China, were offering discounts to the landed price of gold amid lacklustre demand in the physical market, say analysts.

“The move to rise import duty on gold came as a surprise, which lead to a spike in domestic gold prices which were trading discount to the landed price on the back of lacklustre demand in physical market. Domestic gold prices have risen by 15% since December 18,” said Kishore Narne, head of commodities and currency at MOFSL.

Narne continues to hold to his bullish view on gold on the back of trade war, falling interest rates and rising geo-political concerns.

Pritam Patnaik, head of commodities at Reliance Securities, said he also expects gold prices to remain firm. “We see physical demand for gold coming down due to high prices. However prices of gold will continue to remain firm,” he said.

In global markets, spot gold prices remained sluggish below $1400, trading 0.1% lower at $1,398.33 an ounce. Gold had seen a sharp fall in Friday after US jobs growth rebounded strongly in June. Now, analysts are lowering the possibility of an interest rate cut by the Federal Reserve this month. Gold is highly sensitive to interest rates and a lower chance of a cut would increase the opportunity cost of holding the non-interest-bearing bullion. Adding pressure on gold, the dollar has also been on an uptrend against a basket of six major currencies.