Gold demand in value terms reached a record high of $236.4 billion in 2012, while the annual volume of demand fell 4 per cent from the previous year to 4,405.5 tonnes. A rise in demand from institutions and central banks only partly outweighed a decline in consumer demand, according to figures from the World Gold Council.

In the fourth quarter of last year, global gold demand reached 1,195.9 tonnes, a rise of 4 per cent on the same quarter of 2011. Combined growth in jewellery and central bank demand exceeded declines in the investment and technology sectors to generate the increase in overall demand.

In value terms, Q4 last year was the highest fourth quarter total ever, worth a near-record $66.2 billion.

“China and India remain the world’s gold power houses, and by some distance, despite challenging domestic economic conditions. In India, consumer sentiment towards gold remained strong despite measures aimed at curbing demand, reaffirming gold’s role in Indian society. In an underdeveloped financial system in India, gold has an important role to play,” Marcus Grubb, managing director, investment, at the WGC, said.

“Central banks’ move from net sellers of gold, to net buyers that we have seen in recent years, has continued apace. The official sector purchases across the world are now at their highest level for almost half a century. Despite the turbulent macroeconomic climate throughout the year, as well as the regional uncertainties affecting India and China, the two largest gold markets, annual demand was 30 per cent higher than the average for the past decade,” Grubb said.

Not enough

"Despite record levels of central bank buying and still-strong investor demand in 2012, prices have recently slipped back to last year’s mid-point. This looks like fair value to us, but we believe the gold price will be outpaced in 2013 by equities and other assets that are linked to the improving economic outlook," Coutts, the bank, said in relation to such data. 

"However, the rise in central bank purchases to 535 tonnes, the most in nearly half a century, underlines gold’s continuing role as an additional component for emerging economies that are still building up their national currency reserves. The four major reserve currencies are currently offering record low interest rates and negative real returns as well as depreciation through quantitative easing," Coutts continued. 

"High prices have depressed gold consumption for industrial and jewellery fabrication, while encouraging re-cycling. Although recycling slipped back from its 2011 peak, it remained high. Net demand, fabrication less recycling, was thus at its lowest since the depths of the 2009 recession," it added.