PERTH (miningweekly.com) – Global gold demand topped the $200-billion mark for the first time ever in 2011, with demand increasing to 4 067 t, the World Gold Council (WGC) reported on Thursday.

This was also the highest tonnage level since 1997.

The WGC said that the main driver for this increase was the investment sector, where yearly demand reached 1 640 t during the year, up 5% from the previous record set in 2010, and valued at around $82.9-billion.

Demand for gold bars and coins also continued to be robust, climbing by 24% to 1 486 t.

India remained the largest source for demand with 933 t, which the WGC said was notable, considering the volatility of the gold price and the weakness of the Indian rupee against the US dollar during the second half of the year.

In India, gold jewellery accounted for over 500 t of demand, while the investment market demand reached 366 t. Indian demand accounted for 25% of total bar and coin demand worldwide.

In China, yearly demand of 769.8 t was up 20% year-on-year as a result of increases in both jewellery and investment. The largest rise was in investment, where demand of 258.9 t with the value of RMB84.5-billion leapt 69%.

Chinese jewellery demand increased every quarter of last year and was the largest single jewellery market worldwide for the second half of 2011.

The WGC noted that Europe also showed a surge in demand, with the region posting is seventh consecutive yearly gain at 374.8 t.

“What we can see from these 2011 figures is that there were two main factors driving the results: Asian growth and optimism on the one hand and western desire to protect assets against uncertainty on the other,” said the WGC’s MD for investment Marcus Grubb.

“Looking particularly at Asia, there was a major boost to the overall figures from the increase in Chinese demand, which is a trend that we see continuing over the next year. It is likely that China will emerge as the largest gold market in the world for the first time in 2012.”

Grubb noted that the long-term fundamentals for gold would remain strong, with a diverse and growing demand base, coupled with constrained supply side activity.

On the supply side, gold production also reached record highs at 2 809.5 t, up 4% from the 2010 production figures.

Grubb noted that gold recycling was down by some 2% year-on-year, to 1 611.9 t, which indicated that the near-market supplies were drying up, and that consumers may be holding on to gold in the expectation of higher gold prices.