Continuing its losing streak for a third straight session, gold prices plunged by Rs 260 on Thursday to Rs 26,415 per ten grams at the bullion market, tracking a weak global trend amid low demand by jewellers and retailers.
Silver also declined by Rs 80 to Rs 35,250 per kg due to reduced offtake by industrial units and coin makers.
Bullion merchants said a weak trend overseas where gold declined to more than four weeks as jobs data in the US pointed to a possible interest rate hike this month and on signs that India may slow imports.
Meanwhile, bullion traders have welcomed the government's approval of Gold Monetisation scheme saying it will give a boost to the industry that will help them in getting more gold from the domestic market and reduce dependency on imports.
"Government's gold scheme is a positive step that will help in containing large-scale imports, curb country's current account deficit and help the economy," All India Sarafa Association Vice-President Surinder Kumar Jain said.
The Cabinet on Wednesday had approved Gold Bond and Gold Monetisation schemes to reduce the metal's demand in physical form and fish out idle gold lying with households and other entities.
Globally, gold fell 0.4 per cent to USD 1,103.97 an ounce in Singapore.
Besides, subdued demand from jewellers and retailers at domestic spot market dampened sentiment, they said.
In the national capital, gold of 99.9 and 99.5 per cent purity dropped by Rs 260 each to Rs 26,415 and Rs 26,265 per 10 grams, respectively. The precious metal had lost Rs 165 in the previous two days.
Sovereign also weakened by Rs 200 to Rs 22,000 apiece of eight grams.
In a similar fashion, silver ready declined by Rs 80 to Rs 35,250 per kg and weekly-based delivery by Rs 340 to Rs 35,460 per kg.
However, silver coins continued to be traded at last level of Rs 51,000 for buying and Rs 52,000 for selling of 100 pieces.