Gold futures in India, the world's biggest buyer of the metal, dropped nearly 3 percent on Monday to hit their lowest level in 15-1/2 months, mirroring losses in the world market.
At 0516 GMT, the key gold contract for June delivery on India's Multi Commodity Exchange was down 2.64 percent at 27,189 rupees ($500)per 10 grams, after falling to 27,100 rupees earlier, the lowest level since Dec. 30, 2011.
In the overseas market, gold prices took a dramatic U-turn on Monday, reversing early gains to drop to a two-year trough after bullion futures fell on fears about central bank sales and holdings on global exchange-traded funds sank to their lowest in more than a year.
The wedding season has begun in India and will continue till early June. Akshay Tritiya, the second biggest gold buying festival after Dhanteras, also falls in this period.