Gold demand stays subdued on weak rupee

Gold demand in India, one of the world's leading consumers, was subdued on Thursday after a drop in rupee hardened prices during a traditionally lean buying season.

The most-active gold contract for August delivery on the Multi Commodity Exchange (MCX) was up 0.55% at Rs 29,734 per 10 grams by 2.01 p.m.

The rupee, which eased 1% on Thursday, plays an important role in determining the landed cost of the dollar-quoted yellow metal.

"Today demand is negligible. The drop in rupee raised prices, while buyers are waiting for a correction," said a Mumbai-based dealer with a state-run bank dealing in bullion.

"There is no major event to boost gold buying. If prices come down to Rs 29,000 then we can see pickup in demand," the dealer said.

International gold prices traded in a tight $6 range around $1,615 an ounce on Thursday ahead of an expected rate cut by the European Central Bank that should boost liquidity and enhance bullion's appeal.

Poor rainfall in most parts of the country is also weighing on sentiment as monsoon rains are vital to incomes in rural areas, which contribute to 60% of gold imports, dealers said.