India gold futures are likely to extend gains this week helped by the weakness in the U.S. dollar, which enhances appeal of the yellow metal as an alternative investment, and after France and Germany pledged to strike a proposal to recapitalize euro zone banks.

The most-active gold for December delivery on the Multi Commodity Exchange (MCX) was 1.01 percent higher at 26,616 rupees per 10 grams.

Both (gold and silver) should head higher, said Gnanasekar Thiagarajan, director, Commtrendz Research, adding silver could head higher to 54,500 rupees and gold towards 27,000 rupees levels in MCX.

Gold could move in the range of 25,800-27,100 rupees with mild positive bias, said Madhu Nagaraj, an analyst with Vertex Commodities.

The dollar index fell 1 percent on the day on Monday as investors unwound some of their bullish bets on the greenback as risk sentiment improved.

German Chancellor Angela Merkel and French President Nicolas Sarkozy said after talks on Sunday that they aimed to come up with a sustainable answer for Greece's debt problems and agree how to recapitalise European banks.

Rising physical demand ahead of key gold buying festivals could also aid sentiment, analysts said.

Silver for December delivery on the MCX was 1.68 percent higher 53,176 rupees per kg.

Buy silver at 52,400-52,700 with a target of 55,700 with a stop loss below 50,000, said Nagaraj.

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