Gold prices in India, the world's biggest consumer, rose above 26,000 rupees for the first time on Tuesday rallying with world market and supported by a weak rupee, but demand in local spot market was sluggish as buyers chose to wait for a correction.
The October contracton the Multi Commodity Exchange (MCX) was up 3 % to 26,008 rupees per 10 grams at 2.44 pm, after hitting a record high of 26,198 rupees in earlier in the day.
The Indian rupee fell to its lowest in 11 weeks on Tuesday, extending losses to as much as 2.9 % over six sessions, on heightened worries about foreign fund outflows as investors fled risky assets across markets.
International spot gold gained more than 3 % on Tuesday, roaring to all-time highs for a second consecutive session to stand above $1,770 as equity markets dived on growing fears of a global recession following last week's US credit downgrade.
"Demand is still muted. Prices are very high. Consumers are finding it difficult to accept the current price," said a dealer with a private Mumbai-based bank, dealing in bullion.
"Most buyers are waiting for a correction. No one is in any hurry to buy. (And) there is no major festival around the corner," he said. Global price disruptions will keep Indians away from jewellery stores for at least the next few weeks until demand is likely to rise with the onset of the traditional festival and wedding seasons.
"At current levels, demand will remain weak. We may see some improvement in demand if prices fall below $1,680 an ounce," said Haresh Acharya, head of bullion desk, Parker Agrochem Exports Ltd, a precious metals wholesaler in Ahmedabad in western Gujarat state.