Gold extended losses to hit its lowest level in ten months on global cues, attracting bargain hunters in the wedding season.
At 2:51 p.m., the most-active gold for June delivery on the Multi Commodity Exchange (MCX) was 140 rupees lower at 29,465 rupees per 10 grams, after hitting a low of 29,357 rupees, a level last seen on June 1.
Global gold fell for a second straight day to hit its lowest in four weeks, with investors shifting their money into risky assets for better returns on renewed optimism over the U.S. economy.
"Activity is there in the market, physical interest is building up on correction ... market will eye the non-farm payroll data due on Friday," said a dealer with a private bullion importing bank in Mumbai.
India, the world's biggest buyer of gold, has been trying to curb imports to put a lid on the record-high current account deficit. The 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 on Tuesday that the government is unlikely to raise the import tax on gold further to avoid gold smuggling.
However, a weak rupee kept the downside limited. The rupee plays an important role in determining the landed cost of the yellow metal, which is quoted in dollars.
Silver for May delivery on the MCX was 533 rupees lower at 50,940 rupees per kg.