The price dip in November led to a strong recovery in the bar and coin market in the final quarter of 2016, although this didn't offset weak demand in the first three quarters; annual demand reached 1,029t, down 2% year-on-year.
The Brexit vote and the election of Donald Trump drove global demand for gold to a four-year high in 2016, as pension funds and other institutional investors piled into the precious metal while higher prices put consumers off jewellery purchases.
This year, investment demand for gold is on the rise.
The demand for gold rose 2% in the full year 2016 to 4,308.7 tonnes, the organization said pointing that investment demand was up 70%, reaching its highest level since 2012.
"Demand for gold in India for Q4 2016 was at 244 tonnes - up by 3.3 per cent - as compared to overall Q4 demand for 2015 (236.1 tonnes)", the report stated. Together they accounted for around 80% of the full year figure, but Chinese buying dried up completely as the country battled a flight of capital.
Continued global economic and political uncertainty, most notably Brexit, the United States election and currency weakness in China, helped to boost overall investment demand by 70%, to a four-year high of 1,561t.
"But if the ministry announces a cut, we would expect gold to move higher, as India is a key physical demand market for bullion", HSBC analysts concluded.
Gold purchases by central banks shrank 33% to 384 tons - the lowest since 2010 - as foreign-currency reserves dropped.
European politics offers "uncertain outcomes, with parties that were many moons ago fringe parties polling especially well at the moment", said Alistair Hewitt, head of market intelligence at the London-based WGC.
Global gold demand rose merely 2 percent in 2016 and touched 4,309 tonnes.
In its Gold Demand Trends report, the World Gold Council (WGC) has indicated challenging times for Indian investment market in 2017. "ETFs are easy ways for people to access gold". Growth in the sector was supported by net producer hedging, which doubled in 2016, as gold producers saw an opportunity to secure cashflow at higher prices. Prices then fell between October and December, which meant gold prices were 8% higher over the year as a whole. However there were outflows in the fourth quarter. Gold Demand Trends data can also be explored using our interactive charting tool http://www.gold.org/supply-and-demand/interactive-gold-market-charting. While growing fast ETFs in Asia make up a fraction of the total - holdings in China was up five-fold in 2016 but still only totalled around 36 tonnes.