India gold extends gains; physical buying cools

India gold extended gains on Wednesday, tracking firm overseas leads and a weaker rupee, which made the dollar-quoted yellow metal expensive, prompting physical traders to avoid booking fresh deals, dealers said.

The most-active gold for April delivery on the Multi Commodity Exchange (MCX) was trading 0.15% higher at Rs 20,355 per 10 grams at 1:47 p.m., after hitting a high of Rs 20,379 rupees, a level last seen on February 4. The contract had gained close to a percent in the previous session. "Buying was good yesterday morning, but towards the US time, activity has been dull due to sudden 1% rise in prices," said Pinakin Vyas, assistant vice-president with IndusInd Bank in Mumbai. The rupee eased after a near-one-month-high in the previous session as volatile domestic shares provided little support and dollar demand from oil importers weighed on the local unit. Dealers said gold supplies showed signs of improvment after a brief shortage due to excessive snowing in the refining areas and low carry-over stock. "Supplies are improving, but still there is a lag of 4-5 days compared to 7-10 days earlier," said Vyas. Gold imports in India rose 18% in January to 40 tonnes provisionally, and wedding season could further boost demand, the head of a trade body said. India accounts for 20% of global demand for jewellery, and the next marriage season kick offs in February. Winter harvesting season is underway in India and is expected to leave more disposable income with rural households, which contribute significantly to gold demand.