Gold Demand in India Sluggish as Rupee Slide Supports Price

A fall in overseas gold market failed to lift physical demand in India, the world's top consumer, as the depreciating rupee kept prices steady in the local market.

* Demand took a hit as buying declined during year-end holidays and the month is considered inauspicious for purchases, dealers said.

* At 3:05 p.m, the most-active February gold contract on the Multi Commodity Exchange was unchanged at 27,651 rupees per 10 grams.

* "Rupee has gone down considerably, and general feel among consumers is that gold will fall from the current levels. That's why demand is not improving," said a Mumbai-based dealer with a private bank dealing in bullion.

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* "We can see improvement in demand if prices go down to $1,560 per ounce level. Even price rise above $1,650 level will attract buyers. Then people will change their medium term view," the dealer said. International gold was trading at $1,585.

* The on-going Khar mass also affected on purchases, dealers said. Khar Mass is a month in the Hindu calendar from December 16 to January 14 which is considered inauspicious for gold buying and starting new ventures.

* International spot gold edged lower on Wednesday, tracking falls in industrial metals and equities, as concerns about global economic growth weighed on market sentiment amid thin year-end trading volumes.

* The rupee, which plays an important role in determining the landed cost of dollar-quoted gold, weakened to 53.36 to the dollar from 53.015/025 at Tuesday's close, weighed by dollar demand from oil companies and weak shares.

* A Reuters poll earlier this month of 20 hedge fund managers, economists and traders showed international spot gold prices are expected to fall below $1,500 an ounce over the next three months and they are unlikely to retest September's all-time highs until later 2012 at the earliest.

At 1:15 p.m., the following were prices in rupees being quoted by RiddiSiddhi Bullion in the spot market:

Gold .999/10 grams 27,575 27,560

Silver .999/kg 52,100 52,230

At 2:38 p.m., following were prices (in rupees) on the Multi Commodity Exchange of India Ltd.

Feb gold 27,657 +6

Mar silver 52,705 -6

Source: http://www.ibtimes.com/articles/273468/20111228/gold-demand-india-sluggish-rupee-local-market.htm

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