MUMBAI (Reuters) - India's gold futures extended gains for the fourth straight session on Wednesday taking cues from overseas markets, but a firm rupee capped the gains, analysts said.
"Gold has some potential to move higher on expectations of a rate cut (by the U.S. Federal Reserve)," said Kunal Shah, a research analyst at Nirmal Bang Commodities Pvt Ltd.
The U.S. Fed will be meeting on Dec. 16 and is expected to cut rates by at least half a percentage point.
Gold inched up on Wednesday as the euro strengthened against the U.S. dollar and oil rebounded, with investors also keeping an eye on the stock market amid fears of a growing recession.
Gains in gold may be checked by a firmer rupee, analysts said. A strong rupee makes the dollar-quoted gold cheaper.
The Indian rupee strengthened to fresh three-week highs on Wednesday as large sales of offshore non-deliverable forward positions prompted banks to sell dollars in the spot market, with a rise in local shares also helping.
Crucial resistance for the February contract is pegged at 12,660 rupees and a rally is possible only if the contract closes above that level, said Dharmesh Bhatia, technical analyst at Kotak Commodity Services.
February gold may trade in the range of 12,200-12,450, while March silver may be confined to 16,720-17,105 rupees through the day, Shah said.
Open interest for Feb gold on MCX was at 11,131 lots, up from 10,879 a day earlier. Volume on Tuesday was 34.77 kgs.
