Global gold demand fell by 12% during the second quarter of 2015 primarily due to a decline in demand from consumers in India and China, the World Gold Council said.

During the April-June period, demand for gold weighed stood at 914.9 tons compared 1,038 tons in the second quarter of 2014, according to the council’s latest Gold Demand Trends report.

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India’s demand for gold plummeted 23% to 118 tons as bad weather conditions hit rural income. In China slowing economic growth and a rallying stock market led to a 5% fall in demand to 174 tons.

"Looking ahead, there are encouraging signs moving into what are traditionally the busiest quarters for gold buying in India and China," the industry body said in a statement.

However, demand in Europe and the US grew, driven by a mixture of increasingly confident jewellery buyers and strong demand for bars and coins, the report says.

Overall jewellery demand was down 14% to 513 tons, from 595 tons in 2014 due to falls in consumer spending in Asia.

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The US remained steady, with jewellery demand up for the sixth consecutive quarter by 2% (26 tons). In Europe demand was also up, with Germany up 7% and the UK and Spain both growing by 6%, the report added.

Global investment demand was down 11% to 179 tons from 200 tons in the second quarter of 2014. India was the main driver of the fall, down 30% to 37 tons, due to uncertain price expectations and a buoyant stock market.

This was countered by a rise in Chinese bar and coin demand, up 6% to 42 tons. In Europe, fears of a potential Greek exit from the eurozone saw retail investment in gold reach 47 tons, a rise of 19% compared to last year. The US also saw strong demand, with retail investment increasing by 7%.

Also, total supply declined 5% to 1,033 tons, as an increase in mine production of 3% to 787 tons in the second quarter of 2015 was offset by declining recycling levels – down 8% to 251 tons.

Alistair Hewitt, head of market intelligence at the World Gold Council, said: "It’s been a challenging market for gold this quarter, particularly in Asia, on the back of falls in India and China. The reverse is true for western jewellery markets, as increased economic confidence led to continued growth in consumer demand.

"It is fair to say that investment demand for the quarter remained muted given the continuing recovery in the US economy and booming stock markets in India and China during the quarter."