MUMBAI (Reuters) - A marginal drop in gold prices in India, one of the world's top buyers, failed to lift the spot demand on Wednesday as buyers sought steeper fall just ahead of the lean buying season.
Spot price of gold fell by 278 rupees on Wednesday, mirroring overseas market. However, by 1216 GMT, the most-active June delivery on the Multi Commodity Exchange was up 0.05 percent at 28,872 rupees per 10 grams on weak rupee.
"Prices have risen too much. The fall of 200 or 300 rupees is not enough to attract buyers. Prices need to correct by at least 1,000 rupees to change consumer sentiments," said a Mumbai-based dealer with a state-run bank dealing in bullion.
"Jewellers are not active. They know retail demand will remain weak for next few weeks due to monsoon. They are waiting for prices to fall," he said.
Demand usually drops between June and mid-August when there are no major festivals.
Global gold prices eased for a second day on Wednesday, under the influence of a weaker euro as the euro zone debt crisis engulfed Spain and sent investors scrambling for a safe haven in the form of U.S. dollars.
The rupee, which plays an important role in determining the landed cost of the dollar-quoted yellow metal, fell on Wednesday to 56.23/24 per dollar.
Gold demand in India is likely to moderate in 2012 as higher inflation trims disposable income at a time prices are stubbornly high on a weak rupee, the head of the World Gold Council in the country said earlier this month.
Reporting by Rajendra Jadhav; editing by Malini Menon