(Reuters) - India gold recovered more than 1.5 percent on Monday, nearing its highest level in nearly a week, following a rise overseas where investors sought safety amid worries of worsening debt crisis in euro zone, and a weaker rupee back home. * Global gold gained 0.8 percent, extending a 1.2 percent rise in the previous session, as worries about a worsening debt crisis in the euro zone and the bloc's future drove investors to seek safety in bullion. * The most-active gold for October delivery on the Multi Commodity Exchange (MCX) was trading 1.71 percent higher at 28,204 rupees per 10 grams, after hitting an intra-day high of 28,235 rupees, nearing a level seen on Sept. 14. * Investors will focus on a policy meeting of the U.S. Federal Reserve on Tuesday and Wednesday, where the Fed could take steps to increase downward pressure on longer term interest rates to help spur a recovery of the world's largest economy. * The rupee fell more than 1 percent as mounting fears Europe's sovereign debt troubles could trigger a full blown banking crisis curtailed risk appetite and sent shares and the euro lower. * The rupee plays an important role in determining the landed cost of the yellow metal, which is quoted in dollars. * Physical buying retreated after a brief pick-up last week as an inauspicious period, when Indians pay homage to their ancestors, is underway. * "(The) rupee is weaker it is one of the important reason for the spike in local prices and still it is non-auspicious days of Shradh. So demand for the time being is not there," said Sanjeev Garg, director with Delhi-based LMJ International, a commodities trading house. * Festival and wedding demand in India, the world's biggest bullion consumer, will gain pace and peak in October and November, before tapering off in December. * Demand will always be here in India, and due to the uncertainty in equity markets, more and more people should diversify into gold, Garg said. (Reporting by Siddesh Mayenkar; Editing by Rajesh Pandathil)

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