Gold demand improves as prices drop 1 percent

MUMBAI (Reuters) - Gold demand in India improved on Friday as jewellers were placing orders after prices fell more than 1 percent to the lowest in nearly seven weeks on a stronger rupee.

* The partially convertible rupee hit a seven-week high on Friday, helped by corporate selling and stop-losses getting triggered. A strong rupee trims landed cost of imported gold.

* At 3:35 p.m., the benchmark December gold contract on the Multi Commodity Exchange (MCX) was 1 percent lower at 29,178 rupees per 10 grams. It hit a low of 28,915 rupees on Tuesday, a level last seen on August 14.

* "Demand is quite better than last week. Jewellers are comfortable with the current prices. They have started buying for the peak festive season," said a Mumbai-based dealer with a private bank.

* "Ahead of the peak festive season usually jewellers make large purchases. This year, so far they are making small purchases."

* India, the world's biggest consumer of the precious metal, will celebrate the Hindu festivals of Dussehra in the third week of October and Diwali in the first week of November, a period when buying gold is considered auspicious.

* Gold demand from the countryside is likely to rise in coming weeks as farmers are set to harvest bumper crops aided by good monsoon, dealers said.

* Overseas, gold prices were steady on Friday as a partial U.S. government shutdown threatened to hurt economic growth, increasing bullion's safe-haven appeal.

(Reporting by Rajendra Jadhav; Editing by Anand Basu)