India retained its position as the world’s largest gold consumer, with a 6 per cent increase in overall demand to 890 tonnes last year.
Jewellery demand was up 6 per cent to 703 tonnes (662 tonnes), largely boosted by a 14 per cent jump in demand during the December quarter to 204 tonnes.
China retained its second spot, even as it recorded a 9 per cent fall in demand at 747 tonnes last year. Jewellery, which constitutes 70 per cent of its gold demand, fell 11 per cent to 564 tonnes.
In India, the relatively nominal rise in demand despite the annual average price declining 6 per cent was attributed to poor monsoon leading to drought and heavy crop losses in major gold consuming regions in the western and northern parts, said a study conducted by Thomson Reuters.
Drought in some regions forced marginal farmers to sell their jewellery, resulting in an 11 per cent increase in scrap volumes.
Additionally, the floods in Chennai and Puducherry placed a dark cloud over the festive season post Diwali.
In these markets footfalls have been low and those heading out have been forced to consider other household necessities over jewellery, the study said.
Pent-up demand Gold prices are set for a gradual recovery in 2016, particularly in the second half, driven largely by improving fundamentals including revival of pent-up demand in Asia and contraction in global mine production.
The study expect a slow recovery in gold prices in dollar terms this year, with the price trading above $1,200 an ounce towards year-end and averaging at $1,164/oz.