Editor's note: This article has been updated.

The Indian consumer has long been considered to be the world's largest gold importer, absorbing excess gold demand while many other investors around the world sold.

However, Indian gold demand has recently slumped. That's bad news for high-cost gold producers like Harmony Gold (HMY 3.04%) and IAMGOLD (IAG 1.85%).

Concerns?
I would appear that Indian investors are concerned that the domestic price of gold could collapse following recent government rulings.

Traditionally, gold sold within the Indian domestic market trades at a premium to global benchmarks. Before recent changes, only designated banks and state-run trading companies were allowed to import gold. There were also high tariffs placed on imports.

Unfortunately, back during May, the central bank relaxed these import restrictions. This allows private trading companies to bring the precious metal into the country. As a result of these changes, domestic Indian gold prices have started to slide. Traders within the country have started to offload their holdings, fearing further declines and relaxation of the rules.

Worries spreading
Spot gold prices on the Multi Commodity Exchange of India fell around 3.5% during May alone. During the past three quarters, Indian gold imports have halved from the levels reported during 2011, 2012, and the first half of 2013. Gold remains India's second-largest import sector, ranking behind crude oil.

It's not just India, either; Chinese demand for gold jewelry also is down. The two countries together account for half of global gold purchases.

These are worrying figures, and only serve to increase the gloom currently hanging over the gold mining sector. Other concerns include the worry that U.S. interest rates will rise later in the year, and the fact that demand for gold-backed ETFs is falling. These ETFs are dumping their gold holdings on the market.

Taking all of these factors into account, analyst now believe that the price of gold could fall as low as $1,180 per ounce as seen last year. That's bad news for any high-cost producers.

High costs = bad news
Two of the market's highest-cost mid-cap gold producers are Harmony and IAMGOLD, both of which will struggle if the price of gold drops to a low of $1,180 per ounce, as estimated above.

During the first quarter of this year, IAMGOLD reported an all-in sustaining cash cost (AISC) of $1,198 per ounce, down 7% from the year ago period. This drop in costs was mainly due to an improvement in economies of scale.

Nevertheless, since the beginning of this month, IAMGOLD's shares have been on a tear after the company announced an impressive set of drilling results from its Monster Lake project. Still, Monster Lake is only undergoing the early stages of exploration and is unlikely to contribute to the company's results anytime soon.

Meanwhile, Harmony Gold has just reported an AISC of $1,224 per ounce of gold produced for the first quarter of this year, up from $1,222 reported during the same period last year. Luckily, the company received an average price of $1,294 per ounce of gold sold, so it reported a small profit for the period. Further, Harmony should report a strong fiscal second quarter, as the crisis in Ukraine has seen the spot price of gold trade around $1,310 for much of the second quarter.

That being said, if the price of gold falls below $1,222 per ounce, Harmony will suffer.

Foolish summary
With India's demand for gold falling, many analysts now believe that barring any more international crisis, the price of gold will slump below $1,200 per ounce as supply exceeds demand. For high-cost miners such as Harmony and IAMGOLD, this is going to be a problem. Unless they can drastically cut costs, the two companies will struggle going forward.