The total demand for the corresponding quarter of 2013 stood at 337.0 tonne, the WGC Q2 Demand Trends report said.

India's Q2 2014 gold demand value fell by 41 percent to Rs 50,564.3 crore, compared to Rs 85,533.8 crore in Q2 2013.

"The consumer expectations of prices to drop to Rs 25,000 and uncertainty created by the general elections also affected the demand during the quarter.

"However, considering the long term average of the last five years, demand in Q2 remains robust, particularly considering the impact of a policy squeeze and other economic factors that have affected savings in general," WGC Managing Director, India, Somasundaram PR told PTI here.

The total jewellery demand for Q2 2014 also saw a decline of 18 percent at 154.5 tonne compared to 188 tonne in the same quarter of last year.

The value of jewellery demand was at Rs 38,269.5 crore, a fall of 20 percent from Q2 2013 (Rs 47,716.2 crore).

Total investment demand for Q2 2014 was down by 67 percent at 49.6 tonne compared to 149 tonnes in Q2 2013.

In value terms, gold investment demand during the quarter under review was Rs 12,294.8 crore, a drop of 67 per cent as compared to Rs 37,817.6 crore in Q2 2013, the report said.

With the price holding at steady levels and better official supply, the third quarter is looking better and the demand in the second half of the year is likely to be near normal with the coming wedding season and favourable monsoons, Somasundaram said.

Even price premiums in India declined sharply to USD 2 an ounce from the earlier USD 200 after supply pressures loosened as RBI permitted trading houses to import gold again.

"We, therefore, expect annual demand to be 850-950 tonne, against the previous estimate of 900-1,000 tonne with over 200 tonne flowing through the grey market," he said.

Moreover, jewellers selling coins, range bound price and stabilisation of grey market will also boost demand, he said.

The recycling during Q2 this year increased to 16.4 tonne compared to 9.5 tonne in the same quarter last year.

India holds around 22,000 tonne of gold valued at over a trillion US dollars, Somasundaram said, adding therefore, it is essential to find ways of mobilising and monetising the stock to support economic growth for the benefit of the economy as a whole.

PTI