Gold prices in the Indian market crossed the psychological mark of Rs. 31,000 per 10 gram on Thursday, the highest level seen in the past 22 months, while the BSE Sensex though fell by about 400 points in the morning session but later recovered to close about 200 points down, reports NDTV Profit .
On Wednesday, the metal lost Rs. 130 to close at Rs. 29, 670.
The spike is in line with the global market where the safe-haven asset touched $1317 an ounce.
In international markets, gold reached the $1300 an ounce mark after the U.S. Federal Reserve kept the interest rates unchanged and hinted at less monetary policy tightening in future, increasing the opportunity cost of the non-interest yielding metal.
According to HSBC analyst James Steel, the Fed's decision to leave the rates unchanged and the tone of the statement could point to a bullish market for gold in the near-term, adding that the central bank's policies appear "long-term supportive of gold."
The Fed's caution comes ahead of Britain's referendum on June 23 to decide if Britain will remain with or leave the European Union. According to some experts, a Brexit could cause recession, an event that can exert pressure on the global economy and bolster the appeal of gold.
India's gold import registered a four-month low to $1.47 billion in May, 39 percent lower than $2.42 billion in the corresponding month last year.