MUMBAI: India's benchmark gold futures jumped nearly 2 percent on Monday afternoon to hit a record high of 28,350 rupees, buoyed by a rally in the world market and on a weak rupee.
At 2:42 p.m., the October contract on the Multi Commodity Exchange rose 1.96 percent to 28,334 rupees per 10 grams.
The rupee stayed weak in afternoon trade as dollar gained overseas with investors seeking safe-haven assets after bleak jobs data on Friday cemented view the United States might be slipping back into a recession.
At 1:52 p.m., the partially convertible rupee was at 45.88/90 per dollar, weaker than Friday's close of 45.79/80 when it had gained 0.6 per cent. The index of the dollar against six major currencies was 74.970 points, after touching 75.074 points, strongest level since Aug 5 earlier. It had been 74.506 at close of domestic currency markets on Friday.
Meanwhile, gold prices rose back above $1,900 an ounce in London as expectations grew that United States could implement a further round of monetary easing after Friday's weak payrolls data, while concerns over the euro zone debt crisis resurfaced.
Stock markets weakened, with the FTSEurofirst 300 sliding 2 percent in early trade, the euro eased versus the dollar and oil prices fell as investors sold out of assets seen as higher risk in favour of havens like gold and Bunds.
Spot gold was up 0.9 percent at $1,901.50 an ounce at 0916 GMT. It is one of this year's best-performing commodities, up by more than a third in 2011 to date.
European shares fell on concerns that the United States could be set for recession after Friday's weak payrolls data, while German Bund futures hit record highs ahead of a series of challenges in Europe this week.
Standard Bank analyst Walter de Wet said a court ruling due Wednesday that may reduce the freedom of the German government to finance rescues of crisis-hit countries like Greece was supporting interest in safe-haven gold, while a European Central Bank meeting on Thursday will be closely watched.
"There is a growing expectation in the market that we will have to get some policy response from the ECB at some stage," he said. "Whatever that will be, it is more likely to be positive for gold than not. Either they will have to cut rates, or they will have to be more accommodating."
"That just adds to what we're seeing happening in the United States," he said. "It seems that people are more convinced that gold will not come off. Whenever gold retreats $20, $30, we see decent buying coming through."
Gold had a choppy month in August, peaking at a record $1,911.46 an ounce and trading within its biggest range in absolute terms since January 1980, when gold hit a record $835 an ounce, or above $2,000 in inflation-adjusted terms.
