India gold extends gains to record; physical demand muted

MUMBAI |
Mon Aug 8, 2011 2:52pm IST

MUMBAI (Reuters) – India’s benchmark gold futures extended gains by more than 2 percent on Monday and hit a new peak following strong overseas markets and a weaker rupee back home, which hit its lowest level in six weeks, dealers said.

The October contract on the Multi Commodity Exchange (MCX) hit a record of 25,180 rupees per 10 grams, before trading 1.66 percent higher at 25,061 rupees at 2 : 42 p.m.

The rupee fell to its lowest in nearly six weeks after an equities selloff following a U.S. rating downgrade ignited concerns about foreign fund outflows.

The rupee plays an important role in determining the landed cost of the yellow metal, which is quoted in dollars.

Bullion roared to record highs above $1,700 an ounce on Monday as an unprecedented downgrade to the U.S. credit rating sent investors scrambling out of riskier assets, hammering

equity markets and the dollar.

Physical buyers moved to the sidelines, keeping demand muted, as consumers awaited stability in prices.

“Demand is low… but we still managed to sell some quantity,” said a dealer with a private-run importing bank in Mumbai.

Retail gold demand is expected to gain pace in August, when the festival and wedding seasons start in the world’s biggest consumer of bullion.

(Reporting by Siddesh Mayenkar; Editing by Sunil Nair)

Article source: http://feeds.reuters.com/~r/reuters/INbusinessNews/~3/CsdquzKkO8I/idINIndia-58668120110808

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