Gold Demand in India Dropped; Weak Rupee Keeps Buyers at Bay

Gold demand in India, the world biggest consumer, was subdued on Tuesday as a weakening rupee kept buyers at bay, further deterred by a rebound in local prices due to gains in overseas markets, dealers said.

* The most-active gold for December delivery on the Multi Commodity Exchange (MCX) was 0.59 percent higher at 28,615 rupees per 10 grams at 3:01 p.m.

* The Indian rupee, which plays an important role in determining the landed cost of the dollar-quoted yellow metal, fell to an all-time low on Tuesday as oil refiners and other companies scrambled to buy dollars, with the currency looking increasingly vulnerable to a swelling current account deficit.

* The rupee is volatile. Its fall is pushing up the landed cost of gold and buyers are finding it difficult to know how far the rupee can drop. It is making purchases difficult, said a Mumbai-based dealer with a private bank dealing in bullion.

* If the rupee remains volatile, I think buyers will turn towards scrap instead of imports for the short-term, the dealer said.

* The wedding season -- traditionally a moment for splurging on gold -- is currently underway in India, but so far it has failed to bolster demand substantially and dealers say interest is lower than anticipated.

* India gold demand, which recorded a fall of 20 percent in the September quarter, could rise in the last quarter and surpass the 1,000 tonnes demand mark in 2011, according to the World Gold Council figures.

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