At 1058 GMT, the most-active gold for August delivery on the Multi Commodity Exchange (MCX) was 0.44 percent higher at 29,673 rupees per 10 grams, recovering from the previous week's losses of about 2 percent.

"Buying at support of 29,400/29,450 in gold could be a good strategy," said Pranav Mer, senior analyst with Mangal Keshav.

The rupee, which weakened on Monday, plays an important role in determining the landed cost of the dollar-quoted yellow metal.

The euro zone's decision to help Spain's battered banks, boosts risky assets like the yellow metal and pressures the dollar.

Euro zone finance ministers agreed on Saturday to lend Spain up to 100 billion euros ($125 billion) to shore up its teetering banks, providing relief for markets that have lately been gripped with fear of a potential breakdown of the euro zone.

Silver futures are likely to follow gold.

Buying is advised in silver at 54,200 rupees, for a target of 55,250 rupees, said Gnanasekar Thiagarajan, director with Commtrendz Research.

Silver traded at 54,715 rupees per kg on Monday, up 0.93 percent on day.