Diamond News

By Rajendra Jadhav and Sumita Layek

MUMBAI/BENGALURU (Reuters) - Physical gold demand in India was moderate this week amid an improvement in retail purchases before the festival season despite an increase in domestic prices, while top consumer China saw a slight uptick in activity.

In the Indian market, gold futures were trading around 30,272 rupees per 10 grams on Friday, up about 3.7 percent from a more than seven-month low touched on Aug. 17.

The price gains came amid a plunge in the rupee, which fell to a record low against the dollar on Friday.

"Retail buying has picked up in the last few weeks except in Kerala. Demand will remain there for next few weeks unless prices shoot up further," said Aditya Pethe, a director at Waman Hari Pethe Jewellers.

India's top bullion consuming southern state of Kerala was hit by the worst flooding in a century this month, which killed hundreds and caused widespread damage.

Demand in the country is expected to pick up further in the festival season beginning in September, when buying gold is considered auspicious.

Dealers in India were charging a premium of up to $1 an ounce over official domestic prices this week, compared to a premium of $1.25 the last week.

But jewellers who had been aggressively replenishing stocks as prices fell in August were now slowing their purchases.

"Jewellers are cutting purchases ... They think the rupee could recover and local prices could fall again," said a Mumbai-based dealer with a private bank.

In China, premiums were around $6 to $7 an ounce this week, versus the $6 to $8 range last week, amid currency fluctuations, traders said.

"Jewellery wholesalers (in China) have begun stocking up physical inventories, while...

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