Gold futures seen recovering from near two-year low

MUMBAI (Reuters) - Gold futures in India, the world's biggest buyer of the metal, are likely to recover from their lowest level in nearly two years, helped by weakness in the dollar overseas and a pick-up in risk appetite.

Investor confidence in the metal has been eroded - gold plunged 13 percent in the second quarter - as Fed Chairman Ben Bernanke laid out a strategy to roll back the bank's $85 billion monthly bond purchases, which supports an increase in interest rates, making gold less attractive.

Local prices of the yellow metal often mirror overseas leads.

The actively traded gold for August delivery on the Multi Commodity Exchange (MCX) was 0.21 percent higher 25,724 rupees per 10 grams, after hitting a low of 24,830 rupees last week, a level last seen in late September 2012.

There will be bargain hunting and short-covering due to dollar weakness, said Gnanasekar Thiagarajan, director with Commtrendz Research.

The euro rose against the dollar on Monday after data showed euro zone manufacturing activity stabilised, but its gains were seen limited due to expectations the bloc would lag the U.S. economy.

The dollar and gold often move in opposite directions as the two compete for funds globally.

Buying is advised on dips to 25,350 rupees, for a target of 26,000 rupees, with a stop loss of 23,100 rupees, said Thiagarajan.

Silver for July delivery on the MCX was 0.05 percent higher at 40,230 rupees per kilogram.

Buying is advised on dips to 39,850, with a stop loss of 39,200, targeting 41,500, said Thiagarajan.

(Reporting by Siddesh Mayenkar; Editing by Anupama Dwivedi)