As per the research report of World Gold Council (WGC), India which is one of the world's largest consumer of gold saw a 23% dip in demand of gold during the third quarter of 2011 (July-September) to 203.3 tonnes against 263.9 tonnes reported same quarter a year ago.

While world's gold demand rose 6% year-on-year to 1,053.9 tonnes.

The highest dip was seen in the demand for gold jewellery, where it declined 26% y-o-y to125.3 tonnes against 168.4 tonnes reported in Q3 2010. In value terms demand was slightly higher at Rs 314.5 billion.

The Indian gold prices have outstripped international prices during Q3 due to depreciation in the rupee against the US dollar, which made consumers discouraged, resulting a fall in demand.

On the other side, inflation remained high at around 10% during the quarter, which has also affected the demand for gold in India.

However, demand recovered slightly during the closing days of the quarter, as the price dipped back to below Rs 26000 per 10 gram.

While investment demand in gold is on continuous rise in India. As per the data from Association of Mutual Funds in India, total assets of gold ETFs jumped to Rs 90.90 billion as of October 31 against Rs 30.97 billion reported a year earlier.

Gold ETFs in India were launched in early 2007 and at present there are 11 funds.

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