In value terms, gold investment demand rose by six per cent at Rs 95,460.8 crore against 90,184.6 crore in 2012.

Recycled gold, however, declined by 10.79 per cent to 100.8 tonnes in 2013, compared to 113 tonnes in 2012.

The latter half of 2013, Somasundaram said, has seen intense grey market activity but its impact will be more visible and significant this year if the import curbs continue.

Estimates of the extent of gold smuggling in India vary widely, market analysts have suggested it could have added between 20-30 tonnes per month, the report pointed out.

"However, our estimation, based on our own analysis of the market, is that these unofficial flows may be considerably higher. We have previously been on record with our estimate of between 150-200 for 2013, and we feel that the total for 2013, was closer to the top-end of this range," he said.

Talking about 2014, Somasundaram said the industry is not in a very happy situation but the year will be a come back for the precious metal.

"In India, even as the current scenario is not very good, I am positive about gold. I am confident that gold will play a significant role in the country's economy. In 2014, market estimation of gold demand is between 900-1,000 tonnes," he added.

Read More:

'Indian Markets Performed Better Compared To Peers In 2013'

Ten Best Places to Retire In 2014