India gold demand low, price falls eyed

MUMBAI (Reuters) - Indians bought little gold on Monday as prices remained above the psychological mark, with one retailer saying consumers were still visiting with their old gold to pay for new items.

"There is a moderate demand for weddings and general purchases," said Sanjeev Agarwal, managing director of Revah Corporation Ltd, a jewellery chain.

"Conversion of gold for cash is not taking place, but people are using their old gold to pay a part of their new purchases."

Dealers said demand in the wholesale marklet was low as traders expected prices to ease after the U.S. Fed sets interest rates on Tuesday as scheduled.

"The likelyhood of a rate cut has already been priced in," said Ganesh Agarwal of Shiv Sahai & Sons in Chennai.

Expectations of a rate cut amid fears of slower U.S. economic growth have boosted gold of late, and on Monday it gained strength as the markets guessed the extent of the cut.

In the local markets, traders betted on year-end winding down to soften prices and one dealer in a large foreign bank said traders were eyeing $780 an ounce.

Shiv Shahi's Agarwal said demand for imported gold continued to be weak as gold in the local market was cheaper by about 40 rupees per 10 grams owing to the sale of scrap and bars.

Following was the price of .995 gold in the spot market in rupees per 10 grams at 1:10 p.m. :

Bank Monday Friday

HDFC 10,290 10,290

Following are gold prices in rupees per 10 grams on the Multi Commodity Exchange of India Ltd. at 1:46 p.m. :

Contract Current price Net change