Gold prices plunged by Rs 220 on Saturday tracking a weak trend overseas, after a robust employment data in the US strengthened expectations over interest rate hike by the country's central bank in December.

The yellow metal ended at Rs. 26,110 per 10 gram at the bullion market, as poor demand from jewellers and retailers also weighed on the prices.

Overall, the metal prices have slumped by 2.6% this week, touching the lowest levels not seen in the past two months.

"On price outlook, we do not rule out short term downside in gold prices, weighed by relatively strong US dollar. However on a broader perspective, we infer that the yellow metal will be back in the reckoning amid a fragile global economic landscape," said IIFL in a note.

In the overseas markets, the precious metal prices fell below $1,100 an ounce on Friday, as US dollar appreciated further on strong US labour data.

US non-farm payrolls rose 271,000 in October, beating market expectations by a big margin, while unemployment rate fell to its lowest levels since 2008. The upbeat US jobs data fuelled fears over the rate hike by the US Federal Reserve in December, dragging gold prices lower.

"We now expect the Fed to deliver a 25bp rate hike at the December meeting. The market now prices close to 85% probability of a hike in December depending on the level of Fed funds after the first hike and, in all senses, close to as much as the market can price it ahead of the December meeting," said Danske Bank in a note.

Besiders, in her Congressional testimony, US Federal Reserve chairperson Janet Yellen on Wednesday had hinted at monetary tightening next month.

Silver prices also remained under pressure, declining by Rs. 500 to Rs. 35,300 per kg due to broader weakness in the commodity markets.  

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