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Gold Edges Up On Weak Rupee; Demand Subdued

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Indian gold futures edged higher on Wednesday, 29 May '2013 on a weak rupee and tailing gains in the world market, but demand remained sluggish as a lean buying season has started in the world's biggest consumer of the precious metal.

The actively traded gold for June delivery on the Multi Commodity Exchange (MCX) was 0.23 percent higher at 26,473 rupees per 10 gram at 3.28 p.m.

"Demand is slowing down. It is likely to remain weak until the first week of July. Generally demand remains muted in June," said Daman Prakash Rathod, a director with Chennai-based wholesaler MNC Bullion.

"School, colleges are starting from June. Parents will save money for children's admission and other educational expenses," Rathod said.

Premiums for physical gold in India eased to $4 an ounce over spot London prices from $20 just two weeks back, dealers said.

The rupee, which hit a 10-month low on Wednesday, plays an important role in determining the landed cost of the dollar-quoted yellow metal.

Gold edged up in the overseas market, buoyed by strong demand from China after prices fell 1 percent in the prior session, but persistent outflows from exchange-traded funds are expected to cap gains.

The World Gold Council expects Indian gold imports to reach 350-400 tonnes in the second quarter, 200 percent higher than a year earlier and almost half of last year's total imports.

The Reserve Bank of India (RBI) restricted banks from consignment imports of gold, except for jewellery exporters, after imports jumped more than 150 per cent in April, despite a 50 per cent hike in import duty in January.

The RBI said on Monday banks would not be allowed to give loans against units of gold exchange-traded funds and gold mutual funds.

Silver for July delivery on the MCX was 0.12 per cent up at Rs 43,316 per kilogram.

(Reuters)