LONDON: India overtook China as the world’s biggest gold consumer in 2014 as global physical demand fell, an industry report showed on Thursday, forecasting that prices that have declined for the last two years would bottom out this year.

Chinese gold demand slid by more than a third last year to a four-year low of 866 tonnes, while the country’s scrap gold supply rose 21 per cent to an unprecedented 182 tonnes, the report by GFMS analysts at Thomson Reuters showed.

Slower economic growth and a crackdown on corruption helped knock Chinese jewellery demand to 608 tonnes, 33pc below the previous year’s “extraordinary” levels, it said. Physical bar demand fell 53pc to 171 tonnes, a five-year low.

“We do expect an increase in Chinese demand this year. However, without a dramatic course of events we would not expect it to come close to matching the level in 2013,” GFMS analyst Ross Strachan said.

“The recovery will be helped by the fact there was an overhang of stock at the start of 2014 in China due to the voracious buying in 2013, and this kept purchases subdued last year.”

Indian jewellery demand rose 14pc last year to a record 690 tonnes, putting it back ahead of China as the world’s number one jewellery manufacturer.

The drop in buying in China helped drive a 19pc fall in global physical gold demand, with all areas declining except central bank buying, the report said. World jewellery demand fell 11pc.