Mumbai: Indian gold prices surged to a record high on Tuesday tracking gains in overseas markets and a depreciation in the rupee, but the surge dampened demand in the world's second-biggest consumer of the precious metal, dealers said.
In the domestic futures market, MCX gold rose 0.4% to ₹57,050 per 10 grams. The spot rate was Rs 42,160 per 10 grams, according to a report.
On the physical front, India is expected to slash import duty on gold, which could lift retail sales ahead of peak demand season.
Globally, gold prices edged higher as the dollar weakened, with bullion's near-term trajectory likely hinging on US economic data due this week.
Awaiting cues from Fed
Investors awaited the US fourth-quarter GDP growth estimates due on Thursday.
"Any signs of a weaker US economy will be taken as a reason for the Fed to tighten less aggressively, and that could support gold, which would also take in safe-haven flows," said Matt Simpson, a senior market analyst at City Index.
"Disappointing numbers likely to help gold climb above $1,960, but might not break through $2,000 in its first attempt, given the significance of the number."
Traders are mostly pricing in a 25-basis-point (bps) rate hike by the Fed at its January 31-February 1 policy meeting, after slowing its pace to 50 bps in December, following four straight 75-bp hikes.
Lower interest rates tend to be beneficial for bullion, decreasing the opportunity cost of holding the non-yielding asset.
With the Chinese economy reopening and less disruption from COVID-19, it could support a consecutive year of record photovoltaic silver demand, analysts at Heraeus Precious Metals said in a note.