Gold demand wanes as prices hit 2-week high

A weaker rupee helped gold futures surge past their highest level in nearly a fortnight, hurting purchases by gold wholesalers, who had sought to stock for the festival season amid a gloomy import outlook.

The most-active gold for August delivery on the Multi Commodity Exchange (MCX) hit a high of Rs 29,397 per 10 grams early Monday, the level last seen on July 11, before trading 0.37% higher at Rs 29,386 per 10 grams at 13:30PM.

Imports of gold into India have been subdued so far this year, with occasional buying at sub-28,000 level.

"Buying is zero as rupee has depreciated again," said Haresh Acharya, head of bullion desk, Parker Bullion in Ahmedabad, adding there could be compulsory buying for festivals.

The rupee, which dropped to its lowest level in over a week, plays an important role in determining the landed cost of the dollar-quoted yellow metal.

A below-average monsoon could impact farm incomes and thereby gold demand as most of the country's gold imports target rural areas.

India's gold imports fell by over a half in the June quarter and could slide by a third over the next three months as prices inflated by a weak rupee and a 4% import duty encourage traders to use scrap, a Reuters poll showed.

Silver edged lower following copper, another industrial metal.

Silver for September delivery on the MCX was 0.27% lower at Rs 52,697 per kg.