India gold festival sales see moderate start

Enlarge Photo A model poses with gold jewellery during a jewellery show in Kolkata November 1, 2007....

Wed, May 7 02:16 PM

MUMBAI (Reuters) - India's gold demand was moderate on Wednesday with higher prices on the back of a global rise and a locally weaker rupee damping early sales on Akshaya Tritiya day, dealers said.

"There is not much buying in the wholesale segment, but the retail side is good," said a dealer in a large private bank in Mumbai.

Gold prices crept up overseas and hovered near the previous day's one-week high, finding support from crude oil that stayed near a record high level.

But gains were capped as the dollar remained strong in the overseas markets after a U.S. Federal Reserve official said interest rates needed to be raised.

Gold generally moves in tandem with crude oil as the latter signals inflation, while the metal hedges against it. But gold has an inverse relation with the dollar as the two compete for investments.

In the local market, the rupee weakened past 41 per dollar for the first time since August and that firmed up gold, as most of the commodity is imported and paid for in the U.S currency.

"The weaker rupee is discouraging buyers (in the wholesale segment) big time," said another dealer in a private bank.

In Tamil Nadu, where Akshaya Tritiya is most popular, buyers had started visiting jewellery shops, a Chennai retailer said.

"The auspicious time starts at 1.30 p.m.... we will know later how the sales have been this Akshaya Tritiya," said Princeson Jose of Prince Jewellery from Chennai.

Advance orders -- when consumers book gold by paying a part of the cost and take delivery on Akshaya Tritiya day -- are about half compared to last year, Jose said.

Following was the price of .995 gold in the spot market in rupees per 10 grams at 1:15 p.m. :

Bank Wednesday Tuesday

==================================================

Scotia 11,820 11,756

Following are gold prices in rupees per 10 grams on the Multi Commodity Exchange of India Ltd. at 1:47 p.m. :

Contract Current price Net change

===============================================

June 11,642 42

August 11,704 53

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