India's gold consumption in 2011 fell by seven percent to 933.4 tonnes, down from 1,006.3 tonnes, due to volatility in rupee value and the tightening of monetary policy to control inflation, said a report by World Gold Council Thursday.
"The rapid rise and fall in the rupee, and resulting domestic gold price swings had a strong impact on gold buying with both jewellery and investment demand in H2 (second half of 2011) were lower by around 33 percent," the report said.
According to the report, jewellery consumption fell by 14 percent, to 567.4 tonnes in the period under review from 657.4 tonnes in 2010.
However, gold bar and coin segment grew by five percent in the year ended Dec 31, 2011, 366 tonnes from 348.9 tonnes in the corresponding previous year.
The council predicts a short-term slowdown in gold consumption in for 2012. However, it maintains that the demand would be robust in the long term.
"India's importance in the gold market will not diminish, even if demand growth softens. The domestic drivers of gold demand are largely independent of outside forces, firmly supporting gold's diversified demand base. These factors will promote continued growth in demand over the long term."
Interestingly, the council observed that gold demand may be impacted due to lower number of auspicious days in the 2012 Hindu calendar relative to recent years. The report added that global demand in 2011 grew by seven percent to 3,450 tonnes from 3,217 tonnes in 2010.
Global gold jewellery consumption in the period under review was down three percent, at 1,962.9 tonnes down from 2,016.8 tonnes in the previous corresponding year.
Consumption of gold coin and bars increased in 2011 by 24 percent, at 1,486.7 tonnes from 1,199.8 tonnes in 2010.