Mumbai: Demand for gold in India, one of the world’s leading consumers, marginally improved on Tuesday after prices fell to their lowest level in a week on a strong rupee.
The most-active gold contract for August delivery on the Multi Commodity Exchange (MCX) was down 0.32% at Rs29,562 per 10 grams at 04:55 pm.
The rupee, which rose nearly 1% on Tuesday, plays an important role in determining the landed cost of the dollar-quoted yellow metal.
“There is a slight improvement in demand, but buyers are cautious,” said a Mumbai-based dealer with a private bank dealing in bullion.
“Jewellers are cautious. They are monitoring the monsoon’s progress. Poor rainfall can affect farmers’ earnings. It can hurt demand.”
Good monsoon rains are vital to incomes in rural areas, which contribute to 60% of gold imports, dealers said. The country has so far received 25% lower rains than normal since the beginning of the monsoon season on 1 June.
International spot gold rose on Tuesday, taking advantage of a drop in the US dollar after top Federal Reserve policymakers warned about the fragility of the economy.
India’s gold imports could pick up in the second half of 2012 if record prices ease but annual volumes will still fall about 30% after a tax increase, which could crimp demand until 2014, the head of Mumbai’s gold trade association said in June.