MUMBAI (Reuters) - Gold futures fell more than 1 percent on Thursday to their lowest level in more than two months, tailing overseas leads though a weaker rupee kept the downside limited, while premiums eased in the domestic market.
At 1035 GMT, the most-active gold contract for February delivery was 1.47 percent lower at 28,445 rupees per 10 gram on the Multi Commodity Exchange. It had hit a low of 28,390 rupees earlier in the day, a level last seen on October 15.
Silver also dropped to its lowest level in nearly two weeks.
Silver for March delivery was 2.95 percent higher at 45,009 rupees per kg, after hitting a low of 43,629 rupees, a level last seen on December 6, 2013.
In the overseas market, gold slid more than 1 percent to its lowest since late June after the U.S. Federal Reserve took its first step away from the ultra-loose monetary policy that had helped drive bullion prices to record highs in recent years.
The rupee, which weakened on Thursday, plays an important role in determining the landed cost of the dollar-quoted yellow metal.
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In the domestic market, premiums eased to $110 an ounce from up to $160 an ounce quoted earlier this month.
"Small jewellers are hit the most due to policy changes," said Harshad Ajmera, the proprietor of JJ Gold House, a wholesaler in Kolkata, adding premiums had eased to $110 an ounce due to availability of smuggled yellow metal.
Indian gold imports may fall 70 percent in the final quarter of 2013 from 255 tonnes in the year-ago period and are expected to be half the usual levels at 500-550 tonnes next year if new import rules are maintained, a top trade body official said.
To curb a rising trade gap, the Indian government slapped a record import duty of 10 percent, and tied imports for domestic consumption with exports.
India will keep a tight leash on gold imports despite a recent improvement in its trade deficit and lobbying by a bullion industry struggling with high premiums and a supply crunch.
(Reporting by Siddesh Mayenkar; Editing by Subhranshu Sahu)