Gold demand mute as weak rupee raises price

MUMBAI (Reuters) - Gold demand in India was muted on Monday as jewellers were on the sidelines as a weak rupee sent gold prices higher.

India celebrated Dhanteras, the biggest gold buying festival, and Diwali earlier this month, when scarcity of the yellow metal and higher prices pushed consumers to buy silver and diamond jewellery.

The wedding season is underway in the world's biggest consumer of gold.

"Supplies are limited. Only few jewellers are buying at the current price," said Daman Prakash Rathod, director with Chennai-based wholesaler MNC Bullion.

Overseas gold eased on Monday to trade near three-week lows as strong U.S. jobs growth reignited fears the Federal Reserve could soon start scaling back its stimulus, denting bullion's appeal as a hedge against inflation.

The most-active gold contract for December delivery was 0.36 percent higher at 29,811 rupees per 10 gram at 1044 GMT on the Multi Commodity Exchange (MCX).

The rupee hit a two-month low after a stronger-than-expected U.S. jobs report raised concerns the Federal Reserve could start winding down its monetary stimulus as early as this year. A weak rupee makes imports of gold and silver expensive.

Silver contract for December delivery was 0.40 percent higher at 48,335 rupees per kg on the MCX.

($1 = 63.4 rupees)

(Reporting by Rajendra Jadhav; Editing by Anand Basu)