Gold is likely to recover from its lowest level in more than five months, helped by a weaker dollar, which enhances the appeal of the yellow metal as an alternative investment.
The euro retreated from multi-month highs against the yen and dollar on Monday as speculators took profit on the common currency's rally, with the market cautious before a European Central Bank meeting on Thursday.
The actively traded gold contract for April delivery on the Multi Commodity Exchange (MCX) was 0.07 per cent lower at Rs 30,577 per 10 grams, after hitting a low of Rs 30,487, a level last seen on August 20.
"Gold might rise in the short-term due to risk appetite," said Gnanasekar Thiagarajan, director of Commtrendz Research. Buying is advised on dips to 30,450-30,500, with a target of 30,850 rupees, and a stop loss of 30,300, he said.
Reviving physical buying could also aid sentiment.
The weddings and festivals season has started in India, but the government plans to restrict gold buying by announcing more measures in addition to a 50 per cent hike in import duty to keep a lid on its bloating current account deficit.
Silver also edged lower, but could recover in the course of the week.
The silver contract for March delivery on the MCX was 0.47 per cent lower at Rs 58,145 per kg.
"Silver looks good due to smart industrial recovery," said Mr Thiagarajan, adding buy silver on dips to Rs 57,800, for a target of Rs 58,800.
Copyright @ Thomson Reuters 2013