Gold demand subdued as weak rupee hurts

Dealers eye monsoon data for cues, due for release later

Demand for gold in India, one of the top buyers in the world, remained lacklustre, hurt mainly by a weak rupee, with dealers eyeing monsoon data, due for release later on Thursday, for cues.

The most-active gold for October delivery on the Multi Commodity Exchange (MCX) was up 0.28% at Rs 30,089 per 10 grams by 13:30PM. The rupee, which determines the landed cost of imported gold, fell below 56 to the dollar to its lowest in nearly two weeks, on Thursday.

Market sentiment is a little bearish, said a Mumbai-based bullion dealer with a state-run bank. "At this level, there is not much of a demand and the rupee is not helping either."

International spot gold hovered above $1,600 an ounce on Thursday as investors continued to hope central banks would take further steps to boost the global economy, even as recent U.S. data suggested the Federal Reserve may not need to intervene for now.

However, a lower monsoon deficit can have some positive effect on buying, the dealer said.

In the week to August 8, the rainfall was 1% below average, reflecting an improvement in the monsoon during the third month of the season.

Rural areas, which depend on monsoon rains for agricultural yields and income, contribute to about 60% of the country's gold demand.

Gold imports have already declined due to a doubling of import duty, and the drought could further dent demand from rural areas.

Festival season began last week in India, the world's biggest consumer of the yellow metal last year, and will peak in November. The wedding season will also unfold during the period.

Indian markets were closed on Wednesday for a local holiday.