MUMBAI--Gold demand in India, which regained its position as the world's top consumer from China during the last quarter, is likely to fall as much as 33% in 2012 from a year earlier mainly due to near-record prices and gloomy economic conditions, the managing director of the World Gold Council's India office said Thursday.
The South Asian nation regained its top consumer position during the April-June quarter despite a 38% on-year fall in overall demand during the period. Chinese demand fell 7.5% during the same period.
"We have seen some slowdown in China, but eventually they will import more [gold] than India [in 2012]," Ajay Mitra told reporters after releasing the quarterly report.
The persistent inflationary impact has made a big dent in the Indian household budget and is likely to impact overall demand, he added.
Total demand in India during 2012 is likely to be between 688 and 700 metric tons, down about 28%-33% from last year, Mr. Mitra said.
Weak demand from India may further weigh on global prices, which have declined about 11% from a 2012 high of $1,790.66 an ounce. Indian gold prices are hovering around 30,000 rupees/10 grams, just shy of their all-time high of 30,720 rupees.
Prices in India remained near record highs despite declining global prices, as the rupee has weakened against the dollar, making imports more expensive.
The country's jewelry demand in the April-June period fell 30.5% to 124.8 tons, while investment in bars and coins plunged 51% to 56.5 tons, the WGC said.
Mr. Mitra said investment demand in gold is likely to decline more than jewelry demand due to regulatory hurdles, stagnant returns and less consumer spending power.
The overall share of investment in bars, coins and exchange traded funds may come down to about 25% of total demand in 2012 from the current 31%, he added.
In June, the outflow of money from India's gold exchange traded funds hit its highest monthly level due to waning investment interest and a revival in demand for equity products.
But demand for jewelry is likely to revive once the festive season starts in September, Mr. Mitra said.
"Indians love to celebrate festivals, and in my view, the worst is over [for jewelry]."
Write to Debiprasad Nayak at debi.nayak@dowjones.com
