MUMBAI (Reuters) - India gold demand retreated on Wednesday afternoon as prices touched a one-week high on the back of festival-related buying, traders said. This was a reversal of the buying by stockists seen in the previous two sessions as they prepared for the upcoming wedding season, they added. "Today it (gold buying) is dull as gold prices have gone up with the euro," said Pinakin Vyas, assistant vice-president treasury with IndusInd Bank. Overseas gold also extended gains as a U.S. Federal Reserve decision to hold interest rates unchanged hit the U.S. dollar and burnished the metal's investment appeal. International gold was trading at $1,130.75/1,131.75, up from its previous close of $1,124.70/1,126.70 an ounce. "Any corrections to sub $1,100 an ounce level would be bought as weddings are around the corner," said another dealer with a state-run bank. "While sales jumped noticeably on Monday, and our current five-day moving average of sales is more than 30 percent greater than the year-to-date average," said UBS, one of the gold suppliers to India, in a note. India celebrated Gudi Padwa and Ugadi in Maharastra and Karnataka on Tuesday, both of which are auspicious days to buy gold, while the next wedding season will start from April. (Reporting by Siddesh Mayenkar; Editing by Ramya Venugopal) (For more business news on Reuters Money visit www.reutersmoney.in)

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