MUMBAI: Gold demand in India, the world's biggest buyer, was tepid on Monday, as local prices rose the most in four months due to gains on the world market and a sharp drop in the rupee.
In the overseas market, gold climbed to its highest in nearly two weeks on Monday, shrugging off dollar strength, as US economic data pointed to sluggish growth and the world's biggest gold exchange-traded fund recorded the first inflow in two months.
At 0227 GMT, the most-active gold for October delivery on the Multi Commodity Exchange (MCX) was 3.75 percent lower at 28,953 rupees per 10 gram, after rising to 29,049 rupees earlier in the day, the highest level since April 12.
Silver for September delivery on the MCX was 6.61 percent higher at 45,522 rupees per kg.
The rupee plays an important role in determining the landed cost of the dollar-quoted yellow metal.
The Indian rupee weakened towards a record low on Monday after Finance Minister P. Chidambaram unveiled proposals to narrow the current account deficit in a bid to defend the currency as concerns about the slowing economy deepened.
"Buyers are not interested in making purchases at such high levels. They are waiting for a correction. Retail jewellery demand is quite weak," said a Mumbai-based dealer.
Indians bought more gold in July than June despite a series of moves by the central bank to strangle supplies, and their insatiable appetite has forced neighbouring countries to take steps to curb their own imports.
The Indian government is looking to contain gold imports at 850 tonnes, Finance Minister P. Chidambaram said on Monday, as part of efforts to cut the current account deficit which has hit a record high.
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