Gold prices rise on festive demand

A salesgirl shows a gold necklace to customers at a jewellery showroom in Chandigarh November 11, 2012.

NEW DELHI (Reuters) - Gold demand in India, the world's biggest buyer of bullion, rose on Monday as key festivals and the wedding season helped the yellow metal hit its highest level in intra-day trade since September 20.

At 03:37 pm IST, the most active gold for December delivery on the Multi Commodity Exchange (MCX) was 0.77 percent higher at 31,887 rupees per 10 grams, after hitting a high of 31,937 rupees.

The rupee, which fell to a two-month low on Monday, plays an important role in determining the landed cost of the dollar-quoted yellow metal.

"Gold prices are moving up due to higher demand in the physical markets. Imports will resume in the next few days due to the higher demand in the festival and wedding seasons," said Aurobinda Prasad, head of research at Karvy Comtrade.

Diwali, the festival of lights, will be celebrated on Tuesday while the wedding season will continue. Traditionally, both are occasions for buying gold.

Overseas gold edged up on Monday, after posting its biggest weekly gain since late August, on safe-haven buying, driven by worries that the United States could return to recession if Congress fails to reach a deficit-reduction deal.

Silver also moved higher following gold.

Silver for December delivery on the MCX was 0.83 percent higher at 61,425 rupees per kg.

(Reporting by Nidhi Verma; Editing by Anupama Dwivedi)