Heavy demand for India gold amid dwindling stocks

MUMBAI (Reuters) - India's gold prices were higher on Monday as foreign markets rebounded, but heavy demand from investors and retailers left sellers with little stocks to offer, dealers said.

"I am saying 'no' to customers... I'm telling them to inquire the next day," said Jitendra Kantilal, partner at Jugraj Kantilal & Co, a large bullion trader in Mumbai's Zaveri Bazaar.

India's gold prices rose on the back of foreign gold that was up from multi-month lows as investors rushed to cover shorts taking a cue from firm crude oil.

Gold generally moves in tandem with crude oil as the latter signals inflation, while the metal negates it.

In the local market, a weaker rupee against the dollar added to gold's cost as most of India's precious metals are imported and paid for in the U.S. currency.

A dealer in a large bank said the delay in deliveries had increased to one month and premiums ruled to up to $2.5 an ounce against 80 cents in normal times.

"Demand world over has revived, so suppliers are having a problem meeting all the commitments," the dealer said.

Fuelling the heavy demand in the wholesale market, was the retail market that was seeing a rush from customers.

"Having seen gold above 13,000 rupees just recently, consumers are finding current prices very good," said Darshan Manubhai Zaveri, owner of Manubhai Zaveri Ornaments Pvt Ltd, a retailer cum jewellery wholesaler in Ahmedabad.

"If prices stay around these levels, we will have an early Diwali."

Diwali, when people buy gold for auspicious reasons, falls on Oct 28.