Gold demand drops as prices rise on weak rupee

Last Updated: Fri, May 03, 2013 10:54 hrs

Demand for gold in India, the world's biggest consumer of the precious metal, dropped on Friday as local prices rose tracking overseas markets and on a weak rupee.

The key June contract was 0.87 percent up at 27,149 rupees per 10 gram on the Multi Commodity Exchange (MCX) at 3:40 p.m., after hitting a one-week low of 26,365 rupees on Wednesday.

"Demand is very price-sensitive. The general perception among jewellers is prices will come down. That's why whenever prices go above 27,000 rupees, demand is slowing," said a Mumbai-based dealer with a private bullion importing bank.

"Jewellers bought a lot of gold last month when prices fell below 26,000 rupees. Now, they are interested in only bargain-buying," the dealer said.

Indians celebrate Akshaya Tritiya in the third week of May, a time considered auspicious to buy gold, while the current wedding season continues until July.

The rupee, which plays an important role in determining the landed cost of dollar quoted yellow metal, fell on Friday.

In the overseas market, gold rose as a cut in interest rates by the European Central Bank and U.S. Federal Reserve's decision to stick to its stimulus programme burnished bullion's appeal as a hedge against inflation.

Silver for May delivery on the MCX was 1.10 percent higher at 45,031 rupees per kg.

The following were prices of gold and silver in rupees as of 1.15 p.m. local time in the spot market, quoted by IndusInd and PNB Bank respectively:

Friday Thursday

Gold .999/10 grams 27,500 27,000

Silver .999/kg 44,546 43,513

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