Sustained buying by stockists and jewellers ahead of the festive and marriage season also influenced prices.
The government increased duty on gold to 10 per cent from 8 per cent previously as part of measures to contain the current account deficit to 3.7 per cent of GDP in 2013-14.
Duty on silver was raised to 10 per cent from 6 per cent, according to notifications tabled in Parliament by Finance Minister P Chidambaram.
"Gold may witness a further rise in its prices in coming days as the hike would make the precious metal costlier", said Rakesh Anand, an analyst.
Revenue Secretary Sumit Bose said the basic purpose of enhancing the duty was to curb imports of the precious metals to check the CAD and not to raise money.
This is the third increase in gold import duty this year.
Imports of the metal were mainly responsible for the spurt in CAD, which touched a record 4.8 per cent of GDP in 2012-13.
India imported 845 tonnes of gold valued at over Rs 2.45 lakh crore in 2012-13.
Bullion traders said the price of gold would go up by Rs 600 per 10 grams. Industry said the hike would only help the exchequer and while imports would not fall, it would encourage smuggling.
"Domestic prices will go up by Rs 600-700 per 10 grams due to increase in import duty. This would also lead to a shortage of raw material for jewellers," All India Gems and Jewellery Trade Federation Chairman Haresh Soni said.
On the domestic front, gold of 99.9 and 99.5 per cent purity shot up by Rs 565 each to Rs 29,825 and Rs 29,625 per 10 grams, respectively, a level last seen in April.
In Chennai, gold prices gained Rs 830 to Rs 29,810 per 10 grams, while in Mumbai, it rose Rs 260 to Rs 29,660. Prices surged by Rs 600 to Rs 29,965 in Kolkata, while in Delhi, the metal added Rs 565 at Rs 29,285.