However, gold prices rose by Rs 190 to close at Rs 27,190.
On the day, the rupee fell by 24 paise to 63.56 against the dollar, while Sensex tanked 297 points to settle at 27,437.94.
Continued selling by foreign investors, who have been hit by controversial tax issue, kept the rupee under pressure.
Meanwhile, the BSE index fell for the seventh day today in eight sessions after IT behemoth Infosys shares tanked 6 per cent on disappointing earning numbers and guidance.
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Costlier imports after the rupee weakened to over three-month low against the dollar also contributed to the rise in the precious metal prices.
At Kolkata, gold prices surged by Rs 180 to Rs 27,265 per 10 gm, while in Chennai, it gained Rs 220 at Rs 27,210.
Bullion traders said, besides marriage season demand, a firming trend in the global markets influenced domestic markets here.
At the forex market, the rupee today tumbled to 63.64 against the dollar but recovered partially to close at 63.56, registering a loss of 24 paise.
Besides, the benchmark BSE Sensex has crashed by 1,004.16 points or 3.53 per cent this week.
Equity brokers said sustained capital outflows by foreign funds on tax claims despite government's clarification, muted earnings and forecast of a below-normal monsoon, were major factors behind the plunge.
Globally, crude prices slipped in Asian trade on profit-taking following sharp gains in the previous session as ongoing unrest in the Middle-East fuels worries about supplies from the crude-rich region.
Brent crude eased by 28 cents to USD 64.57 per barrel in afternoon trade.