Gold Hits 7-Week High; Demand Recoils.

MUMBAI: India gold futures extended gains into a seventh session to its highest level in seven weeks on Monday afternoon, prompting traders to move to the sidelines, unwilling to get stuck with high-priced stocks.

"There are a few deals, but nothing substantial to write home about. I covered for 200 kgs below $1,385 on Friday," said a dealer with a state-run bank in Mumbai, which imports bullion.

The most-active April contract on the Multi Commodity Exchange (MCX) was trading 0.70 percent higher at 20,692 rupees per 10 grams at 1:38 p.m., after hitting a high of 20,705 rupees, a level last seen on Jan. 4, in step with overseas market, where safe-haven buying was triggered by unrest in the Middle East.

Though a strong rupee kept the upside limited. The rupee plays an important role in determining the landed cost of the yellow metal, which is quoted in dollars.

The Indian rupee rose to its strongest in more than a month on Monday boosted by firm regional currencies and early gains in the euro, but choppy domestic shares kept sentiment cautious.

Winter harvesting season is underway in India and is expected to leave more disposable income with rural households, which contribute significantly to gold demand. Marriage season has also started and will last through May.

India accounts for 20 percent of global demand for jewellery, making it the world's biggest consumer.

Gold imports in the quarter to December rose 30 percent to 265 tonnes, and a likely increase in import duty is seen in the upcoming budget, the World Gold Council said.

SILVER NEARS 50,000 RUPEES/KG: Silver prices on the Multi Commodity Exchange rose 2.6 percent to hit a contract high of 49,840 rupees per kg, nearing the keenly-watched 50,000 rupees level.

India's silver appetite has rebounded from the low of 699.75 tonnes in 2006, as consumers sought cheaper investment tool, and the Bombay Bullion Association, a trade body, expects imports to be at 2,400 tonnes in 2011.

Source : economictimes.indiatimes.com