* Global gold demand down 4 pct last year at 4,405 T
* Jewellery buying fell in India, China
* U.S., European coin and bar investment also dropped
* Central bank buying hits 48-year high
Global gold demand fell last year for the first time since 2009 as jewellery buying abated in the key Indian and Chinese markets and U.S. and European coin and bar investment dropped, the World Gold Council said on Thursday.
While gold consumption is expected to stabilise this year, it may be some time before it revisits record levels seen in the depths of the financial crisis, the WGC said in a report.
"It's hard to see a major move up in demand (this year)," the WGC's managing director for investment, Marcus Grubb, said. "Demand will remain high, but we're talking small single-digit numbers in terms of growth from the current tonnage level."
"The tonnage last year was 4,405 tonnes for consumer demand, and if you add in over-the-counter demand, it's another 100 tonnes higher," he said. "We would expect 2013 to be quite similar to that."
Grubb said he sees gold prices, which have traded between $1,625-$1,695 an ounce this year, staying within their current trading range, although potentially market-destabilising events such as upcoming U.S. budget talks could push them higher.
Gold is down 1.4 percent this year after posting its biggest quarterly drop since 2008 in the last three months of 2012.
Buying by central banks peaked in the fourth quarter at 145 tonnes. In the full year, central bank purchases continued their upward trend to hit a 48-year high at 534.6 tonnes.
Grubb said he expected the official sector to match last year's buying in 2013. "Emerging country central banks regard quantitative policies as divisive and (believe they) affect the value of the assets that they hold - the dollar and euro, for example," he told the Reuters Global Gold Forum.
"Because they are concerned about sovereign debt as an asset class, they are diversifying away from traditional currencies and buying gold as a hedge."
But jewellery demand overall fell 3 percent last year to 1,908.1 tonnes, with the biggest absolute decline noted in India, the world's largest gold consumer, where a weak rupee left consumers struggling against record-high local prices.
In the fourth quarter it rose 11 percent, however, helped by a 35 percent rebound in Indian jewellery demand. "Jewellery could have a good year in 2013," Grubb said. "Western demand might at last improve as the U.S. economy and others improve."
China, the second-biggest gold buyer behind India, saw a 1 percent drop in jewellery demand to 510.6 tonnes, its first annual decline since 2002.
Overall demand was flat in China in the full year and fell 12 percent in India, although buying rose in the final quarter as buyers scrambled to avoid a widely anticipated hike in import duty announced in January.
"Provided we see no more increases in import duty, we still think we will see India continue to recover from what was a difficult year in 2012 overall," Grubb said. "Some of the buying may have been pulled into Q4 (by anticipation of the duty hike), but overall we think that will be countered by other factors."
He said a higher number of auspicious gold-buying occasions in the first quarter of 2013 would likely favour the metal.
"When you look at the full year, we're anticipating that we'll see 865-965 tonnes of demand," he said.
A rebound in Indian consumption helped overall jewellery demand rise 11 percent in the final quarter,
JURY OUT ON CHINA
In China, demand is expected to recover to between 780-880 tonnes this year, against 776.1 tonnes last year.
"The jury's out on a major re-acceleration of growth in Chinese gold demand," Grubb said. "Last year we saw the first significant slowdown in the Chinese economy in years. That did affect these numbers."
"What you're seeing in January and February is a re-acceleration in the Chinese economy," he said. "We will see what that does to gold demand in the first part of 2013."
Bar and coin investment fell sharply in the United States and Europe last year, with U.S. offtake dropping by more than a third to 53.4 tonnes and European buying down 29 percent to 273.6 tonnes.
Overall investment demand last year fell 10 percent to 1,534.6 tonnes. That was led by a 17 percent dip in bar and coin demand, with bar investment falling by a fifth to 941.1 tonnes.
Investment via gold-backed exchange-traded funds rose, however, with ETF demand up by more than half at 279 tonnes.
"There was a pick-up in U.S. coin and bar demand towards the end of the year because of the fiscal cliff," Grubb said. "But overall for the year it was weak, and it reflects the fact that in Europe the announcements by the European Central Bank took away tail risk in the mind of the investor."
"The announcement of OMT (bond-buying) in Europe and quantitative easing in the United States also mitigated fears of a near-term crisis, and I think that's why bar and coin demand fell. Institutional investors and private wealth took a different view - you see the ETF tonnages went up 51 percent and over-the-counter (demand) had a strong year."
He said while more optimism over the outlook for the global economy was likely to encourage investment in other assets like stocks, the fact that much of that was driven by extremely loose monetary policy meant gold investment was unlikely to fall.
"Investors are trying to call a turn in the asset cycle," Grubb said. "The jury's still out on whether this will be the year when it actually happens. Even if you do start to look at the world more optimistically in 2013, it doesn't mean there isn't a role for gold in your portfolio. There clearly is, to keep the risk down as you pursue more volatility."