Indian gold fell to its lowest level in a week on follow-through selling on Thursday, a day after Cyprus was forced to sell most of its gold reserves, though the physical market was quiet as banks, the primary dealers of bullion, were shut for a holiday.
At 3:07 p.m., the most-active gold for June delivery on the Multi Commodity Exchange (MCX) was down 136 rupees at 29,094 rupees per 10 grams, after hitting a low of 29,081 rupees, a level last seen on April 5, following weakness in the global markets.
The contract had shed more than 1 percent on Wednesday, after news of the sale of gold reserves by debt-laden Cyprus.
U.S. gold was 0.19 percent lower at $1,555.8 an ounce due to uncertainty over the Federal Reserve's stimulus programme.
"Market is in a holiday mood, everyone is buying according to requirements. We see them come at 28,700 rupees," said Ketan Shroff, director with Mumbai-based Penta Gold.
Banks were shut in India, the world's biggest buyer of the metal, for a local festival that marks the start of the auspicious period.
The wedding season has begun in India and will continue till early June. Akshay Tritiya, the second biggest gold buying festival after Dhanteras, will also take place during this period.
India has been trying to curb imports to put a lid on the record-high current account deficit. The federal government raised the import duty on gold, which it called a dead investment, by 50 percent to 6 percent in January.
Finance Minister P. Chidambaram suggested last week the government was unlikely to raise the import tax on gold further to avoid gold smuggling.
Silver for May delivery on the MCX was 0.67 percent lower at 51,426 rupees per kg.