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MCX gold futures flat; strong rupee offsets global cues

A saleswoman displays a gold necklace at a jewellery shop in Agartala, capital of Tripura, June 25, 2009. REUTERS/Jayanta Dey/Files

MUMBAI (Reuters) - India gold traded flat on Wednesday afternoon as support from record overseas markets was offset by a strong rupee, which traded at its highest level in 35 months, pushing physical traders on the sidelines, dealers said.

* At 2:09 p.m., the most-active gold for August delivery on the Multi Commodity Exchange (MCX) was trading 0.34 percent higher at 23,215 rupees per 10 grams. The contract had struck a record of 23,358 rupees on July 25.

* "Demand is muted. I think festival buying will start from mid or late August," said a dealer with a state-run bullion dealing bank in Mumbai, adding "We hope prices not accelerate with current pace."

* Overseas spot gold hit an all-time high on Wednesday, for the sixth time in two weeks, as worries grew whether the United States could avert a debt default while its two key political parties were still locked in stalemated talks to raise its debt ceiling.

* The rupee climbed to its highest level in 35 months on Wednesday, tracking the euro's gains against the dollar and stronger Asian peers.

* The rupee plays an important role in determining the landed cost of the yellow metal, which is quoted in dollars.

* Retail gold demand is expected to gain pace next month, when festival and wedding season start in the world's biggest consumer of bullion.

* "Usually June and July is a non-season for Indian market, due to record prices people are waiting for corrections. Very thin volumes are taking place," said Chanda Venkatesh, managing director with CapsGold in Hyderabad .

(Reporting by Siddesh Mayenkar; Editing by Rajesh Pandathil)