Gold up from 18-month low; physical sales below expectations

MUMBAI (Reuters) - Indian gold futures bounced from their lowest level in more than 18 months on Tuesday mirroring global markets, with physical traders witnessing a small revival in demand, but below expectations.

A stronger rupee kept the upside in prices limited. The rupee plays an important role in determining the landed cost of the dollar-quoted yellow metal.

The actively traded gold for June delivery ended 156 rupees higher at 25,790 rupees per 10 gram on the Multi Commodity Exchange, recovering from a low of 25,270 rupees struck earlier in the session, a level last seen in late September 2011.

"Sales are not on the expected lines... Traders feel the current rally is a consolidation phase and market will come down," said a dealer with a bullion importing bank in Mumbai, adding premiums have increased by 10-20 cents to $1.8 an ounce on London prices.

In the overseas market, gold rose 1 percent after a drop to a two-year low earlier in the session ignited physical buying, but investors frustrated by the metal's lacklustre performance remained cautious amid fears of RBI sales and global growth.

"We might see good sales for Akshaya Tritiya, as sentiment is still nervous," said Prithviraj Kothari, director with Mumbai-based wholesaler RSBL Bullions, adding there could be short-covering to $1,410 (an ounce) after price decline.

India, the world's biggest buyer of the yellow metal, will celebrate Akshaya Tritiya, a key gold buying festival, next month. The wedding season has also begun and will continue till early June.

May silver, however, was 0.52 percent lower at 44,149 rupees per kilogram.

(Reporting by Siddesh Mayenkar; Editing by Subhranshu Sahu)