After a sharp fall on Monday night, gold futures on MCX (Multi Commodity Exchange of India) were trading 1.3 percent or Rs 644 higher in Tuesday morning session at Rs 50,392 per 10 grams. Silver futures were trading 2.19 percent or Rs 1,330 higher at Rs 62,184 per kg.
The recovery in domestic prices was on the back of a surge in international rates of the precious metal that gained on hopes of additional US stimulus measures to curb the impact of a rise in COVID-19 cases.
Spot gold was up 0.5 percent to $1,871.81 per ounce on Tuesday.
Late on Monday evening, Pfizer Inc said its experimental COVID-19 vaccine was more than 90 percent effective in Phase 3 trials. Pfizer and German partner BioNTech SE said they expect to seek US emergency use authorization later this month.
Positivity from the news caused gold futures to slump Rs 2,500 per 10 gram while silver had crashed Rs 4,600 per kg. Investors dumped the safe-haven metal for stocks.
Spot gold was down 4.2 percent to $1,870.51 per ounce on Monday night, which is a sharp contrast from its near two-month peak of $1,965.33 that it hit in the morning session on the back of a weaker dollar and hopes of additional US stimulus on Joe Biden's win in the presidential election.
Experts say that markets are holding on to gold as they await clarity on stimulus measures to support the world's largest economy and some unanswered questions on the vaccine's effectiveness.
Last week, the US Labor Department's employment report showed that the US economy created the fewest jobs in five months in October and more Americans have been working part-time. This has created an urgency in additional stimulus to support the US economy even as the Fed Reserve is taking measures to support growth.
Lack of additional immediate aid for COVID-19 endangers the American economy's recovery, and could also cripple the nation's health care system. A divided Congress, (a Democratic president and House, and a Republican Senate) has lowered expectations for a massive US fiscal stimulus package.
Further, scientists said that while the initial trial results for Pfizer Inc and BioNTech's vaccine for COVID-19 far outpaced their expectations for protection against a completely new disease, many questions remain unanswered.
Experts said that questions remain unanswered on whether the vaccine can prevent severe disease or complications, how long it will protect against infection and how well it will work in the elderly.