Gold prices fell further on Friday to stay near their lowest level in a month, weighed by a stronger rupee amid flat overseas markets, prompting importers to stock up the yellow metal for the wedding season. Silver also declined.
The wedding season in India, the world's biggest buyer of gold, started in November and will continue until May. Festivals also take place during this period.
The most-active gold for February delivery on the Multi Commodity Exchange (MCX) hit a low of Rs 30,610 per 10 grams, a level last seen on December 20. The contract was trading 0.28 per cent lower at Rs 30,646 at 2:57 p.m.
"Today morning, the rupee gave good support for bullion customers... People who have stocked are eyeing the benefit of customs duty hike," said a dealer with a private bank dealing in bullion in Mumbai.
India witnessed a huge surge in imports of gold in the first week of January, when the finance minister hinted at a hike in import duty from the current 4 per cent. The rupee has been appreciating since January 8 on the back of a slew of measures taken by the government, such as partial de-regulation of diesel prices.
A strong rupee makes the dollar-quoted yellow metal cheaper for local holders.
"We are likely to see the same challenges facing the Indian market, with local buyers at the mercy of the rupee's direction against the dollar, and amid the constant threat of government intervention," said Joni Teves from UBS.
Imports may fall by 25 per cent this year if, as expected, the government again raises the duty on the precious metal, a trade body head said on Thursday.
Silver for March delivery was 0.33 per cent lower at Rs 59,415 per kg.
Copyright: Thomson Reuters 2013