As per World Gold Council (WGC) report, gold demand in the Indian market declined by 29% to 207.6 tonne in the first quarterly period (January-March) of 2012 as the elevated import duty on the costly metal, a dropping Indian unit and the excise duty on jewelry disheartened buyers.

In terms of value, the demand declined by around 3% at Rs 56,650 crore that is lower as the value of yellow metal has increased in an aggressive manner over the previous year.

There was a 21-day countrywide stir by retail merchants after the administration announced 1% excise duty impacting sales. But the administration afterward rolled back the verdict on imposing excise tax on jewelry.

The demand for jewelry in volume terms declined 19% to 152 tonne in January-March quarter.

But, in value, it surged by 10% y-o-y to an all-time peak of Rs 41,480 crore owing to higher rates.

The investment demand for the costly metal remained at Rs 15,170 crore, a 27% declension over the same quarter of 2011 in value terms.

The administration, as a deliberate plan, needed to dishearten large-scale import of gold that was draining the nation of expensive foreign exchange at a time when exports are decelerating.

The administration also took actions to restrain black money invested in the bullion market.

The cooling of demand has also assisted in cushioning of gold cost, which remains at around Rs 28,000 per 10 gramme having gone down from record peak of Rs 29,590 on April 30.

On May 17, gold rates increased by Rs 298 to end at Rs 28,260 for 10 gramme after declining below Rs 27,000 a day before.

Commodity expert Vijay Bhambani, CEO, BSPLIndia. com stated, “Bullion and energy prices in the US do soften prior to the presidential election. Oil is down and so is gold. During the 'US presidential cycle', money gets sucked out from commodities and gets pumped into the equity market and this is why gold prices are subdued. The problem in the Euro zone has helped the dollar to strengthen and the stronger the dollar, the weaker are the commodities markets.”