Record rupee weakness triggers recovery in gold

Gold recovered from its lowest level in over a week after the rupee touched a new low on Friday, driving away physical traders on a day the government retained its normal monsoon forecast, vital to rural demand.

At 0850 GMT, the most-traded gold contract was trading at 29,965 rupees per 10 grams, up from the previous session's low of 29,815 rupees.

"Activity is still dull despite yesterday's fall because of the constant fall in the rupee," said a dealer with a private bank in Mumbai.

The rupee weakened beyond the psychologically important 57-per-dollar mark on Friday, hitting a record low for a second consecutive session.

The rupee plays an important role in determining the landed cost of the dollar-quoted yellow metal.

India's monsoon rains are still expected to be average in 2012, allaying concerns over farm output triggered by sparse rainfall in the last few weeks.

Rural areas, which contribute to over 60 percent of gold demand, are dependent on monsoon rains to spur agricultural production and disposable incomes.

The onset of the rains curtail festive and wedding activity.

Silver followed a similar trend.

Silver for July on the MCX was 0.28 percent higher at 53,045 rupees per kg.