Indian gold jewellery consumption declined by 44 per cent in the December 2011 quarter compared with the year-ago period, according to World Gold Council data. This drop was for the second quarter in a row. China's demand, on the other hand, grew 2 per cent in the same period.
This resulted in China overtaking India to become the largest gold jewellery consumer for the second quarter in a row. The September 2011 quarter had seen India's jewellery demand fall 25 per cent against a 13 per cent expansion in Chinese demand.
Hit by a depreciating rupee and high inflation, India's share in global demand dropped to 24 per cent in the six months ended December 2011. In the year-ago period, India had accounted for 33 per cent of the global demand. China's share moved up to 28 per cent from 23 per cent in the same period.
In tonnage terms, India consumed 228 tonnes of gold in the six months ended December 2011 while China's demand was at 262 tonnes.
Indians didn't appear to appreciate gold as an investment either. Global gold investment demand took an upturn on economic uncertainties in developed nations — the December 2011 quarter alone saw ETF demand almost quadrupling.
Including coins and bars, global investment demand was up 28 per cent for the six months ended December 2011. Moving in the opposite direction, though, India's investment demand fell 29 per cent in the same period.
The dark note on which demand ended in 2011 is unlikely to change in the current quarter. Gold prices have begun to rise again, with international prices already up 13 per cent from January to date. Import duties on gold and silver have also been hiked, increasing the cost consumers will have to bear.