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.
The Income Tax Department has been levying 1 per cent TCS on cash purchase of bullion in excess of Rs 2 lakh and jewellery in excess of Rs 5 lakh since July 1, 2012.
Officials of NMDC declined to comment on the issue, saying they have signed a non-disclosure agreement with Vietnamese firm Masan Resources.
Marketmen said apart from a weak trend overseas, where strengthening dollar eroded demand for the precious metal, easing demand from local jewellers and retailers at the domestic spot markets kept gold prices lower.
The move by the world's biggest cotton producer is likely to help rival suppliers like Brazil, the United States and some African countries boost exports, with some India textile mills even starting to import cheaper fibre from overseas.
The mining industry as a whole has been frustrated by a lack of available high-quality copper assets at time demand for the metal is predicted to rise and Vedanta is wrestling with the need to remove large amounts of water, amongst other issues.
"I think the market is responding positively and you can see the drop in supply," Mohammed Saleh al-Sada told reporters.
Controversy over Trump's temporary travel ban on people from seven Muslim-majority countries has recently boosted appetite for bullion as a safe-haven asset, while political uncertainty in Europe amid upcoming elections has buoyed the dollar.
In the national capital, gold of 99.9 per cent and 99.5 per cent purity shot up by another Rs 200 each to Rs 29,850 and Rs 29,700 per 10 gram.
Spot gold was up 1.1 percent at $1,233.01 an ounce by 3:02 p.m. EST (2002 GMT), after touching $1,233.80 -- a level last reached on Nov. 11. U.S. gold futures settled up 0.9 percent at $1,232.10.
Gasoline stockpiles rose by almost 21 million barrels during the first 27 days of 2017, compared with an average increase of less than 12 million barrels at the same time of year during the previous decade.
Wall Street's top banks expect just two rate hikes from the Federal Reserve this year and see only a modest risk to the U.S. central bank being pressed into a more aggressive pace of monetary policy tightening, a Reuters poll showed on Friday.
Traders said the strain between Tehran and the United States raised concerns that U.S. sanctions could be tightened further to impact Iranian oil exports, which were only allowed to return to normal last year.
Gold went steady at Rs 29,550 per 10 grams in scattered deals even as it strengthened overseas.
In the national capital, gold of 99.9 and 99.5 per cent purity declined by Rs 50 each to Rs 29,550 and Rs 29,400 per ten grams, respectively. The precious metal had lost Rs 150 yesterday.