India gold steady; physical buying muted

A saleswoman displays a gold necklace at a jewellery showroom in Kolkata August 1, 2011.

MUMBAI (Reuters) - India gold futures were steady above 26,000 rupees on Thursday afternoon as support from a weaker rupee offset a decline in the overseas markets, while physical trading was a 'little muted'.

* The most-active gold for October delivery on the Multi Commodity Exchange (MCX) was 0.02 percent higher at 26,610 rupees per 10 grams at 4:02 p.m., near the record high of 26,457 rupees struck in the last session.

* The rupee fell, weighed by oil importers' demand for dollars and weak domestic shares, with movements in the euro eyed in the backdrop of debt worries in the region.

* The rupee plays an important role in determining the landed cost of the yellow metal, which is quoted in dollars.

* Overseas gold fell 1 percent as buyers took a breather after earlier taking the market up to record highs, with a decision by the CME Group to raise margins on COMEX gold futures taking some of the heat out of appetite for the metal.

* Demand was muted as traders got accustomed to the keenly watched level.

* "I have covered for 150 kgs... it's not a bad thing considering it is just five hours of trade and gold is trading above 26,000 rupees," said a dealer with a state-run bullion importing bank.

* Gold demand from India, the world's biggest buyer of the yellow metal, will gain pace in coming weeks on the back of wedding and festival demand.