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LONDON (Reuters) - A bounce in investment to a four-year high drove a modest gain in gold demand last year, data from the World Gold Council showed on Friday, even as use of the metal in jewellery slid to its lowest since 2009 and coin and bar buying dipped.
Global demand for physical gold in the form of jewellery, coins and bars fell 9 percent as higher prices and import curbs hurt demand, particularly in the major Chinese and Indian markets. Central banks also bought a third less gold.
However a surge in investment in gold-backed exchange-traded funds offset that to lift overall gold demand by 2 percent to 4,309 tonnes, its highest since 2013.
"There are three primary factors that fuelled strong inflows into ETFs -- we had the spread of negative interest rates, then the steady pushback in expectations surrounding U.S. interest rate (hikes), and the uncertainty stemming from geopolitical risk," said Alistair Hewitt, head of market intelligence for the industry-funded WGC.
"Investment as a whole posted its best year since 2012, but elsewhere demand was subdued."
ETF buying saw its strongest quarter on record in the first three months of last year, with 342.3 tonnes added to funds, chiefly in the United States and Europe. That tailed off later in the year, however, with outflows of 193.1 tonnes seen in the fourth quarter.
Investment in coins and bars fell 2 percent. Britain, where the pound fell after the June vote to leave the European Union, was a bright spot, with demand rising 28 percent to 10.9 tonnes.
Global jewellery demand, the single biggest demand segment for gold, fell 15 percent to 2,042 tonnes.
Indian consumer demand fell 21 percent last year to 675.5 tonnes, its lowest since 2009, as prices rose and import curbs were introduced. The WGC sees it remaining close to this level this year, at 650-750 tonnes.
Demand in number one consumer China is expected to improve to 950-1,000 tonnes, after it fell 7 percent last year to 913.6 tonnes, its weakest since 2012.
Central bank demand was in positive territory for a seventh straight year, but was at its lowest since 2010 at 383.6 tonnes.
"If you look at gold as a percentage of FX reserves, the twin effects of FX reserves coming down and the gold price rising has boosted gold as a reserve asset across central banks around the world," Hewitt said. "That has been another factor that weighs on reserve managers' minds."
Reporting by Jan Harvey; Editing by Adrian Croft