Gold importers on sidelines eyeing US Fed

Indian gold importers preferred to stay on the sidelines as prices hovered near its peak, and traders waited for U.S. Federal Reserve's decision on possible measures to stimulate the economy.

At 1:05 p.m., the most-active gold for October delivery on the Multi Commodity Exchange (MCX) was 0.06 percent higher at 31,925 rupees per 10 grams, very near to previous session's peak of 32,043 rupees.

"We are waiting for the FOMC (U.S. Federal Open Market Committee) to speak tomorrow... everybody is on wait and watch," said Ketan Shroff, director, Pushpak Bullion, a Mumbai-based wholesaler.

The chances that the Fed would launch another round of quantitative easing this week have jumped after disappointing U.S. employment data, which pushed up spot gold on Friday to above $1,740 for the first time since the end of February.

Easy monetary policy benefits gold, which attracts investors worried about potential inflation risks associated with cash printing by the central bank.

India, the world's biggest buyer of bullion, celebrates Ganesh Chaturthi next week and festivals will continue till November.

Investors also eyed the movement in the rupee for direction. The rupee plays an important role in determining the landed cost of the dollar-quoted yellow metal.

Silver reached another peak in a steady session following the yellow metal.

Silver for December delivery on the MCX was 0.06 percent higher at 64,017 rupees per kg, after hitting a peak of 64,215 rupees.