Chinese demand is forecast to reach 900-1,000 tonnes this year, against 913 tonnes last year, while Indian consumption is forecast at 650-750 tonnes, against 660 tonnes in 2016, the WGC said.
Gold demand was up 15 per cent in the quarter ended March, at 123 tonnes, against 107 tonnes logged in the same period past year, largely due to stable prices and a lower base.
Gold ETFs were hardest-hit by the slide in demand: the 109.1 tons of the precious metal bought are only a fraction of demand in the first quarter of a year ago.
Central bank demand has continued to slow, however, down 27 per cent to 76 tonnes, contributing to the overall decline.
The World Gold Council stopped short of calling it a slide in demand, saying the difference on the year is especially pronounced due to record-high demand one year ago.
Despite enthusiasm from European investors, the demand for gold through ETFs dropped by 68 percent to 109.1 tonnes in the first quarter.
GDP Grew Just 0.7 Percent In First Quarter Of 2017
Analysts also cautioned that the most recent numbers may have suffered some distortion, with a rebound likely in the next quarter. This is a slowdown from a 2.1 percent rate in the fourth quarter and was below median consensus estimate of 1 percent.
There was also a 21 per cent fall in recycling to 283 tonne from 360 tonne during Q1 a year ago.
World Gold Council said, "The steady state of global demand concealed a more varied country-level picture". Again, while that's a dramatic decline, the WGC offers some perspective: "this is more an indication of the atypical strength of 2016 inflows than of recent weakness".
Alistair Hewitt, head of market intelligence at the World Gold Council, points out that although demand has declined year-on-year, the first quarter of 2016 was always going to be hard to beat, as at the time demand was "exceptionally high". The UAE's flattish demand was in line with the trend in the Middle East, which remained almost unchanged at 54.6 tonnes, compared with 54.8 tonnes in a year-earlier period.
Tawhid Abdullah, chairman of the Dubai Gold and Jewellery Group, said despite the downward demand trend predictions by experts, consumer demand for gold jewellery in the UAE has been steadily increasing. Chinese investment demand also was strong. "China led the way with bar and coin demand surging 30 per cent, breaching 100 tonne for only the fourth time on record, fuelled by concerns over potential currency weakness and a frothy property market", Hewitt added.
The government's push for transparency in India's economy began to take effect in the gold market, with a gradual shift towards electronic transactions, it said. "But demand remains relatively weak in an historical context, 18 per cent below the 5-year quarterly average", the report said.
Stable gold prices, which were up two per cent in the March quarter to ₹26,249 ( ₹25,677) per 10 grams, helped revive demand. "It signals both a return of optimism and the resilience of this industry that has been living with some tough challenges since 2013", WGC Managing Director, India, Somasundaram PR told PTI here. Gold Demand Trends data can also be explored using our interactive charting tool http://www.gold.org/supply-and-demand/interactive-gold-market-charting.