Gold recovered from its lowest level in over a week after the rupee touched a new low on Friday, driving away physical traders on a day the government retained its normal monsoon forecast, vital to rural demand. * At 0850 GMT, the most-traded gold contract was trading at Rs 29,965 per 10 grams, up from the previous session's low of Rs 29,815. * "Activity is still dull despite yesterday's fall because of the constant fall in the rupee," said a dealer with a private bank in Mumbai. * The rupee weakened beyond the psychologically important 57-per-dollar mark on Friday, hitting a record low for a second consecutive session. * The rupee plays an important role in determining the landed cost of the dollar-quoted yellow metal. * India's monsoon rains are still expected to be average in 2012, allaying concerns over farm output triggered by sparse rainfall in the last few weeks. * Rural areas, which contribute to over 60 percent of gold demand, are dependent on monsoon rains to spur agricultural production and disposable incomes. * The onset of the rains curtail festive and wedding activity. * Silver followed a similar trend. * Silver for July on the MCX was 0.28% higher at Rs 53,045 per kg.

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