While the gold market remains robust - with gold demand remaining almost unchanged compared to the same period in 2013 - demand in China and India fell in the first quarter from the previous year's record levels.

While the gold market remains robust, with gold demand remaining almost unchanged compared to the same period in 2013, demand in China and India fell in the first quarter from the previous year's record levels, according to the latest trend report from the World Gold Council.

Consumer gold demand in China fell 18 per cent to 263.2 tons in the first three months, with Chinese demand for gold coins and bars down 55 per cent on last year. This was partly offset by a per cent rise in demand for jewelry in China, which became the largest global market for gold demand in 2013.

Indian consumer demand dropped 26 per cent to 190.3 tons in the first quarter. Gold jewellery consumption was down 9 per cent and coin and bar buying fell 54 per cent. Indian demand was particularly hit by factors including duty and restrictions on gold imports, coupled with restrictions on the free movement of cash and other assets, such as gold in the run up to the election, which had the effect of dampening down genuine purchases of gold using cash.

Following an exceptional year in 2013, overall gold demand in in the first quarter for 2014 was 1,074 tons, almost unchanged compared to the same period in 2013.

“The first quarter of 2014 signals a return to the long term average patterns of demand, holding steady at 1,074 tonnes. It is clear that the longer term underpinnings of the gold market – such as jewelry demand in Asia – remain firmly in place demonstrating the continuing resilience of the gold market and the unique nature of gold as an asset class, rebalancing to reflect demand,” said Marcus Grubb, managing director, investment strategy, World Gold Council.

Overall jewelry demand made moderate gains of 3 per cent, largely due to lower gold prices compared  with the first quarter of 2013 and seasonal factors, notably Chinese New Year, which contributed to record first quarter jewellery demand in China.

Outflows from gold-backed exchange-traded funds slowed to just 0.2 tons, compared to a fall of 177 tonnes in the first quarter of 2013.

Total investment demand dipped slightly to 282 tons in the first quarter, compared with 288 tons in the same quarter a year ago, while demand for bars and coins was 283 tons - a fall of 39 per cent from last year.