A strong recovery in domestic demand during the last three quarters of 2009 helped India reclaim by the year-end its position as leading gold purchaser, having bought a total of 480 tonnes during the year.
According to data released by the World Gold Council, even though India retained the top slot, the consumption was still 33 per cent lower than the 2008 level of 712.6 tonnes.
"Following on from an extremely weak first quarter, the Indian market enjoyed a solid recovery over the remainder of 2009. Over the year as a whole, tonnage off-take totalled 480 tonnes, down 33 per cent from 712.6 tonnes in 2008," said a statement from the World Gold Council.
"Nevertheless, India held onto its position as the world's largest gold consuming nation," it added.
The total consumption was helped particularly in the last quarter of the year owing to the start of the wedding and festive seasons, including Diwali.
"The announcement of a 200 tonne purchase by the Reserve Bank of India played a key role in underpinning sentiment and gold price expectations, reinforcing the perception that gold is reliable and safe," the council said.
As per the report, the demand was also driven by people in rural areas, who were holding their savings in cash deposits, and from non-resident Indians coming home for their winter vacation.
"In turn, the increase in activity saw retailers start to rebuild their inventories, reversing some of the run-down that occurred earlier in the year," the report said.
China was second among the top gold consumers, with total consumption for the region including mainland China, Hong Kong and Taiwan being 461.9 tonnes.
Gold, which saw keen interest from investment funds and analysts alike during the tumultuous period of the financial crisis, will according to the council continue to be looked at as a safe avenue of investment.
"We expect investor support for gold in 2010 to remain solid. The search by investors and asset managers for portfolio diversification is expected to continue," the council said in its outlook for 2010.
"On a more tactical note, the high levels of economic, inflation and exchange rate uncertainty are unlikely to disappear anytime soon. As global economic conditions improve, jewellery and industrial demand are likely to continue to recover."