Gold demand improves as prices drop 1 percent

Last Updated: Fri, Oct 04, 2013 10:33 hrs

Gold demand in India improved on Friday as jewellers were placing orders after prices fell more than 1 percent to the lowest in nearly seven weeks on a stronger rupee.

The partially convertible rupee hit a seven-week high on Friday, helped by corporate selling and stop-losses getting triggered. A strong rupee trims landed cost of imported gold.

At 3:35 p.m., the benchmark December gold contract on the Multi Commodity Exchange (MCX) was 1 percent lower at 29,178 rupees per 10 grams. It hit a low of 28,915 rupees on Tuesday, a level last seen on August 14.

"Demand is quite better than last week. Jewellers are comfortable with the current prices. They have started buying for the peak festive season," said a Mumbai-based dealer with a private bank.

"Ahead of the peak festive season usually jewellers make large purchases. This year, so far they are making small purchases."

India, the world's biggest consumer of the precious metal, will celebrate the Hindu festivals of Dussehra in the third week of October and Diwali in the first week of November, a period when buying gold is considered auspicious.

Gold demand from the countryside is likely to rise in coming weeks as farmers are set to harvest bumper crops aided by good monsoon, dealers said.

Overseas, gold prices were steady on Friday as a partial U.S. government shutdown threatened to hurt economic growth, increasing bullion's safe-haven appeal.

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