LONDON (Commodity Online): Gold price may be booming, but demand for gold has drastically fallen thanks to the record yellow metal price, says a new report from the World Gold Council (WGC). The WGC report also said speculative activity in gold futures market is keeping the yellow metal prices at higher levels.

According to a report from Reuters, quoting the WGC report, global investment demand for gold has dropped from high levels in the third quarter of 2008. “Retail investment in products such as coins and bars was down 31 percent year-on-year, while ETF inflows tumbled 72 percent to 41.4 tonnes,” the report said.

Following are the key points from the WGC report:

**Demand for gold has fallen 34 percent in the third quarter as high prices weighed on investment flows and led to a slump in jewellery buying in key markets like India and the Middle East.

** Indian jewellery demand tumbled 42 percent to 111.6 tonnes in the third quarter from a year earlier, though it inched up from extremely low levels earlier in the year. In the Middle East, jewellery buying was down 34 percent at 69 tonnes.

**Greater China, however -- which comprises China, Hong Kong and Taiwan -- saw a 10 percent rise in overall demand to 128.6 tonnes, while jewellery demand rose 7 percent.

**Chinese consumers have seen less of an impact on local gold prices from currency fluctuations, and their economy has been more resilient than many. The market also remains relatively immature in terms of consumer buying.

** Total gold supply edged down 5 percent in the third quarter. Mine production rose, but a dearth of sales from central banks -- which turned net buyers of gold in the quarter -- and producer dehedging cut into total supply.

**Central banks bought 15 tonnes of gold in the third quarter, their second straight quarter as buyers. In the third quarter of last year, they sold 13 tonnes of gold.

**Supply of recycled gold to the market rose 31 percent to 283 tonnes, but was still significantly down on the 569 tonnes it hit in the first quarter of 2009 as prices powered through $1,000 an ounce.

The WGC report said one of the main reasons for gold prices shooting up these days is the purchase of 200 tonnes of gold by India from the International Monetary Fund (IMF).

WGC's investment research manager Rozanna Wozniak said: “Speculation in gold futures and expectations for more official sector bullion buying are keeping prices elevated despite a dearth of physical demand.”