As India gold prices dipped backed by a strengthening rupee, jewellers restocked for the upcoming wedding season in the world's biggest consumer of the precious metal, dealers said.
At 3:36 p.m., the most-active February gold on the Multi Commodity Exchange was down 0.32% at Rs 27,762 per 10 grams as an appreciation in rupee outweighed gains in world prices.
"Jewellers were restocking. Demand was good in southern India, especially in Tamil Nadu, due to the Pongal festival," said Chanda Venkatesh, managing director with CapsGold, a bullion merchant in Hyderabad.
People in Tamil Nadu will celebrate Pongal, a popular harvesting festival, in mid-January.
"Demand will improve considerably in coming weeks due to wedding season," Venkatesh said.
International spot gold was on course for a fifth straight session of gains on Thursday as growing anxiety on Iran boosted its safe-haven appeal and rising seasonal demand in China buoyed sentiment.
The Khar Mass period has been weighing on demand, dealers said. Khar Mass is a month in the Hindu calendar from December 16 to January 14 that is considered inauspicious for gold-buying and starting new ventures in many parts of the country.
The rupee, which plays an important role in determining the landed cost of the dollar-quoted gold, rose to 52.85/52.86 to the dollar from 52.95/52.96 on Wednesday.
India has made hallmarking gold jewellery mandatory, a senior government minister said on Wednesday, a move that could boost demand in the world's biggest gold market by taking care of quality worries.
Gold imports by India plunged 56% to 125 tonnes in the fourth quarter of 2011, cutting full-year imports by 8.4% as record high prices and high interest rates hit demand, the head of India's leading bullion body said.
