LONDON (Reuters) - Demand for gold fell last year for the first time since 2009 as Asians bought less jewellery and Western investment dipped, the World Gold Council said in a report bears saw as new evidence the 12-year rally may be topping out.
The WGC, which is funded by the gold industry, said on Thursday that gold consumption was expected to be steady this year but added that it may be some time before it revisits the high levels seen in the worst of the financial crisis.
"It's hard to see a major move up in demand (this year). I know there are bears out there who are starting to call the end of the bull market in gold, but we don't agree," said the WGC's managing director for investment, Marcus Grubb.
"Demand will remain high, but we're talking small single-digit (percent) numbers in terms of growth from the current tonnage level," he said.
In 2012 demand was down 4 percent from the previous year's total, the WGC report said. "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," Grubb added. "We would expect 2013 to be quite similar."
Grubb said he saw gold prices, which have traded between $1,625 and $1,695 an ounce this year, staying in their current trading range, although events that could destabilise the market, such as U.S. budget talks, could push them higher.
The gold price is down 1.4 percent so far this year after posting its biggest quarterly drop since 2008 in the last three months of 2012. Credit Suisse, Goldman Sachs and GFMS have all forecast a turn in gold's bull cycle this year.
"Unless something major changes in the macro landscape, this (report) does back up the idea that investors' attention is much more focused elsewhere at the moment," Credit Suisse analyst Tom Kendall said.
Jewellery demand fell 3 percent last year to 1,908.1 tonnes, with the biggest absolute drop noted in India, the largest gold consumer, where a weak rupee led to 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 rise in import duty that was 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.
He said a higher number of auspicious gold-buying occasions in the first quarter of 2013 would probably favour the metal.
"When you look at the full year, we're anticipating that we'll see 865-965 tonnes of demand," he said.
GRAPHIC - World Gold Council demand trends report: http://link.reuters.com/vex85t
JURY OUT ON CHINA
In China, demand is expected to recover to between 780 and 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."
Buying by various central banks continued its 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, partly because monetary easing by developed countries was undermining confidence in the value of currencies.
"Emerging country central banks regard quantitative easing 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. "They are diversifying away from traditional currencies and buying gold as a hedge."
Bar and coin investment fell sharply in the United States and Europe last year, with U.S. offtake dropping by more than a third and European buying down 29 percent. Overall investment demand last year fell 10 percent to 1,534.6 tonnes.
Investment via gold-backed exchange-traded funds rose, however, with ETF demand up by more than half at 279 tonnes.
"Overall for the year (coin and bar demand) 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," Grubb said.
"The announcement of (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."
(Editing by Veronica Brown and Anthony Barker)