In Delhi, gold prices plunged by Rs 800 to Rs 28,550 per 10 gram, the lowest level since August last year. In Mumbai, the price fell below the 28,000 mark dropping by Rs 780 to Rs 27,840 per 10 gram.
The precious metal dropped by Rs 800 to Rs 28,310 per 10 gram in Chennai, while it lost Rs 605 to trade at Rs 28,340 per 10 gram in Kolkata.
Traders attributed the sharp fall gold prices to RBI's decision to ease import restriction on the metal which triggered heavy sell-off by stockists. RBI allowed select trading houses, in addition to already permitted banks, to procure the precious metal to boost exports.
There are expectations that RBI's move would increase supplies and reduce prices in the domestic market, they said.
RBI in July last year had imposed severe restrictions on gold imports in order to check burgeoning current account deficit and sliding rupee.
The central bank had tied imports with exports and prescribed a 20:80 formula. This facility was available to select banks only and other entities were barred from importing the metal.
A weakening trend in global markets, which normally sets price trend on the domestic front, too weighed on prices here.
The rupee today strengthened by 30 paise to close at over 11-month high of 58.47 against the US dollar. A stronger rupee makes imports cheaper.
Welcoming RBI's decision on easing the 20:80 gold import norms, the World Gold Council said this will help in increasing official supplies.
In futures, the June contract of the metal trading 0.66 per cent lower at Rs 27,190 per 10 grams after hitting a low of Rs 27,151 earlier in the day on the MCX.