Gold stays firm drawing sellers to market

MUMBAI (Reuters) - India's gold prices remained firm on Thursday on account of a weaker rupee and stable overseas markets, where a record-high crude oil kept gold's inflation-busting allure alive.

Demand was weak with several people taking profits from their holdings, widening the gap between the price of imported gold and locally recycled one.

"There are more sellers than buyers... we are telling the sellers (on phone) not to come," said Jugraj Kantilal, partner at Jugraj Kantilal & Co, a popular shop in Mumbai's Zaveri Bazar where sellers offload gold scrap.

The Indian rupee was weaker against the dollar as crude oil hit record highs, raising concerns of more capital outflows. The dollar affects local gold as most of the metal is imported.

Firm crude oil also boosted gold's appeal as an inflation hedge.

Local traders were selling gold cheaper by up to 200 rupees per 10 grams because recycled gold stocks were landing up in the market, a dealer in a bank said.

Most of the sellers were distressed stock market players who needed to liquidate gold bars to cover up for losses, said Kantilal.

Dealers said demand may revive at the end of August, when manufacturers would seek the metal to prepare for the festivals and wedding season that would last till the end of the year.