MUMBAI (Reuters) - India's gold prices were higher on Wednesday and demand eased as traders wound down after festivals and paused for lower prices and the next round of weddings-led retail demand, dealers said. "Demand is down though the appetite is still there," said a dealer in a large private bank. Foreign gold that guides the local markets rose for the third straight day as the dollar weakened and crude oil rose, sparking off speculative buying ahead of a key U.S. interest rates decision. In the local market, prices broke above the psychological mark of 12,000 rupees per 10 grams that served as the major deterrent for demand. There was a lull in retail sales after strong demand earlier in the week, when people shopped for auspicious reasons with the Dhanteras festival on Sunday and Diwali on Tuesday. "People were very happy with the prices... sales were as much as last year or maybe higher for Diwali," said Ashish Pethe of Waman Hari Pethe Jewellers in Mumbai. Pethe said consumers were encouraged to buy, having seen gold at all-time highs above 14,300 rupees earlier this month.

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