Bullion traders said that apart from a firm trend overseas, increased buying by local jewellers at domestic spot market mainly led to rally in gold prices.
Silver followed suit to recapture the Rs 41,000-mark by climbing Rs 1,050 to Rs 41,350 per kg on increased offtake by industrial units and coin makers.
India imported 18,000 tonnes of petrol and 39,000 tonnes of diesel in the first nine months of the current fiscal year, Oil Minister Dharmendra Pradhan said in a written reply to a question in the Rajya Sabha.
Traders said demand weakness brought on by the end of wedding season at the domestic spot market kept up the heat.
The slump in prices has occurred as more rigs are deployed to look for oil in the United States and as crude inventories in the US, the world's biggest oil consumer, have surged to a record.
Gold imports reduced to 54.1 tonnes in December and 53.2 tonnes in January from a high of 119.2 tonnes in November, the month during which the government scrapped the old Rs 500/1,000 notes.
Gold firmed up 0.31 per cent to $1,204.50 an ounce and silver 0.44 per cent to $17.02 an ounce in New York yesterday.
Gold prices saw a sharp downturn on Friday, plunging as much as Rs 400 to an over 2-month low of Rs 28,850 per 10 grams.
Gold prices could see a correction in coming days on the back of strong expectation of rate hike by the US central bank.
Presenting the Delhi budget for 2017-18, Deputy Chief Minister Manish Sisodia said the cut in VAT on ATF will be applicable for direct flights between Delhi and remote areas identified under the RCS scheme as per prescribed conditions.
Marketmen said a weak trend overseas as investors anticipate higher borrowing costs in the US next week that strengthened the dollar and eroded demand for the precious metals as a safe-haven, mainly dampened the sentiment.
The precious metal has fallen in five out of the last six sessions as expectations for the US central bank to push ahead with a rate increase this month ramped up.
Traders said apart from a weak trend overseas, fall in demand from local jewellers and retailers following end of the marriage season mainly pulled down gold prices.
Silver also went past the Rs 43,000-mark by covering up Rs 400 at Rs 43,100 per kg, backed by increased offtake by industrial units and coin makers.
Non-subsidised LPG, bought by those who have either given up their subsidies or exhausted the quota of 12 bottles of 14.2-kg in a year at below market price, will now cost Rs 737.50.
Gold prices had touched Rs 30,325 per 10 grams on October 18, 2016.
Applications for Sovereign Gold Bonds will be accepted till March 3, 2017 and the Bonds will be issued on March 17, 2017.
Spot gold was on track for its biggest daily gain since Feb. 6, rising 0.9 per cent by 1611 GMT to $1,249.05 an ounce, its highest since Nov. 11. US gold futures rose 1.3 per cent to $1,250.
India could be a challenge as the implications are unclear of PM Modi's decision to withdraw high value banknotes, hitting consumer spending in a cash economy and reducing sales of some smaller diamonds.