Citizens are encouraged to deposit jewellery, bars or coins with banks so it can be refined to meet fresh demand and cut the need for imports
Silver coins also spurted by Rs 1,000.
Sentiments remained bullish as gold rose to a two-week high in overseas markets, gaining with other commodities as the dollar weakened, after the US Congress passed the 'fiscal cliff' deal, easing concern that a recovery in the world's biggest economy may be derailed.
Silver also slumped by Rs 1,700 to Rs 37,200 per kg.
A weak trend was noticed in Mumbai, as gold of 99.9 and 99.5 per cent purity slipped by Rs 60 each to Rs 30,540 and Rs 30,390 per ten gram respectively, while silver lost Rs 200 at Rs 45,600 per kg.
Traders said sentiment remained bearish after gold and silver fell in global markets as the dollar's rally to a 13-month high dampened demand for the precious metal as an alternative investment.
Silver also recovered by Rs 515 to Rs 36,750 per kg on increased offtake by industrial units and coin makers.
Silver also dived by Rs 600 to Rs 40,600 per kg.
However, silver coins gained Rs 500 to Rs 73,000 for buying and Rs 74,000 for selling of 100 pieces.
Silver coins remained unaltered at Rs 69,000 for buying and Rs 70,000 for selling of 100 pieces.
The precious metal had gained Rs 325 in the previous two sessions.
Traders said stockists selling against sluggish demand at higher levels mainly pulled down both gold and silver prices.
Marketmen said apart from increased buying by jewellers and retailers to meet upcoming festive season demand, a firming global trend on speculation prices near an eight-month low will spur more buying as the US Federal Reserve begins a two-day policy meeting, also boosted the sentiment.
Silver also rebounded by Rs 360 to Rs 41,770 per kg on increased offtake by industrial units and coin makers.
silver coins held steady at Rs 52,000 for buying.
Gold in New York, which normally set price trend on the domestic front, rose by 0.2 per cent to $1,186.20 an ounce and silver by 1.1 per cent to $15.76 an ounce in Thursday's trade.
Silver advanced by Rs 150 to Rs 34,200 per kg on increased offtake.
Silver met with resistance and fell by Rs 200 to Rs 36,000 per kg.
Silver also dropped by Rs 550 to Rs 40,350 per kg.
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The current upsurge in gold prices placed the metal to a level last seen on April 10.
Gold in Singapore, which normally sets price trend on the domestic front, rose 0.3 per cent to $1,199.65 an ounce.
Silver followed suit and advanced by Rs 50 to Rs 33,750 per kg.
Traders said reduced offtake by retail customers on sluggish demand at prevailing higher levels kept pressure on gold prices, while silver rose on fresh buying by industrial units and coin makers amid a firming global trend.
Globally, gold added 0.4 per cent to $1,228.65 an ounce in Singapore.
Traders said sentiment turned bearish on emergence of stockists selling at existing higher levels amid weak global trend as improving economic growth reduced demand for the precious metals as an alternate investment.
Indian overtakes China in gold consumption.
In Zaveri Bazar, gold is being traded at Rs 26,920/10 gm
Silver ready rose by Rs 350 to Rs 33,850 per kg.
Silver also spurted by Rs 1,000 to Rs 37,500 per kg.
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Traders said continued selling by stockists in tandem with a weakening global trend, on speculation that the US Fed may begin scaling back monetary stimulus as the economy improves, mainly kept pressure on prices.
Silver also dropped by Rs 800 to Rs 40,600 per kg on reduced offtake by industrial units and coin makers.
Silver followed suit and traded higher by Rs 200 at Rs 34,200/kg.
Gold prices recovered by Rs 85 to Rs 26,625 per 10 grams at the bullion market.
The securities regulator's approval for the first US-listed exchange traded funds (ETF) to track bitcoin has given Indian cryptocurrency companies hope that the move would create domestic support for the digital assets. The US Securities and Exchange Commission (SEC) on Thursday approved 11 ETFs for bitcoin, perhaps the most popular virtual currency. It would enable investors to access bitcoin without challenges such as setting up wallets or accounts with crypto exchanges that have previously suffered cyberattacks or implosion.
Traders said profit-selling by stockists at prevailing higher levels amid a weak global trend mainly pulled down both gold and silver prices.
After losing Rs 730 in last six sessions after the Reserve Bank of India eased imports curbs by scrapping 80:20 scheme, gold staged a strong comeback by rising Rs 840 to close at Rs 27,040 per ten grams, a level last seen on October 30.
On the domestic front, gold of 99.9 and 99.5 per cent purity surged by Rs 625 each to Rs 31,750 and Rs 31,550 per ten gram, respectively. Sovereign followed suit and rose by Rs 200 to Rs 25,100 per piece of eight gram.
Silver also recorded a steep fall of Rs 1,550 to Rs 34,450 per kg.
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Traders said some local buying mainly helped both gold and silver prices to recover some ground.
The government on Friday slashed the import tariff value on gold to $398 per ten grams while raising it marginally on silver to $643 per kg in line with global trends.
