India gold extended last week's gains to hit another peak on Monday afternoon in step with overseas markets and a weaker rupee, pushing traders to the sidelines in a seasonally lean demand period.

* The most-active gold for August delivery on the Multi Commodity Exchange (MCX) was trading higher by 0.97 percent at 23,323 rupees per 10 grams at 1:24 p.m., after hitting a contract high of 23,339 rupees earlier.

* "Demand is dull as prices are on the top side. Some people who were short in the market have covered...," said a dealer with a state-run bullion importing bank in Mumbai.

* Overseas gold hit a record high above $1,622 an ounce, while the dollar steadied and Asian stocks slipped as investors piled into bullion over fears of a possible U.S. debt default as the debt ceiling talks in Washington stalled.

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

* The rupee weakened, weighed by dollar demand from local oil companies for import payments, with choppy domestic shares offering little direction, a day before the RBI's policy review.

(Reporting by Siddesh Mayenkar; Editing by Subhadip Sircar)