Demand for gold, the price of which has surged to a record high of $1,920 per ounce this year on economic uncertainty, rose by 6 per cent in the third quarter of 2011 from a year ago, reaching 1,053.9 tonnes, industry data shows.

In financial terms, the demand figure is $57.7 billion tonnes, the highest-ever figure in value terms, the World Gold Council reported today.

Investor demand was the main driver, the WGC said; investor demand rose 33 per cent year-on-year to 468.1 tonnes, generating record quarterly demand of $25.6 billion.

Investment demand in Europe reached a record quarterly value of €4.6 billion, equating to 118.1 tonnes - a year-on-year increase of 135 per cent.

“The increase in overall investment demand was all the more impressive given the sharp gold price correction in September, which encouraged a wave of profit taking among bar and coin investors. Virtually all markets saw strong double-digit growth in demand for gold bars and coins,” the WGC said.

Chinese jewelry demand rose 13 per cent higher year-on-year at 131.0 tonnes, equivalent to RMB46.0 billion (around $7.24 billion). The bulk of this increase was seen in smaller cities as retail chains expanded their networks to meet increasing demand fuelled by rising income levels. China’s growing appetite for gold as a means of investment saw demand for gold bars and coins expand by 24 per cent from year earlier levels to 60.2 tonnes.

Jewelry demand in India was sluggish during the seasonally slow months of July and August, compounded by high inflation and greater volatility in the local gold price, the WGC said.

Overall, Indian jewelry demand in Q3 saw a 26 per cent decline in tonnage, when compared to the same quarter in 2010, to 125.3 tonnes, however yearly demand to the end of September is very close to the record levels seen in 2010.

Marcus Grubb, managing director, investment at the World Gold Council commented: “Unsurprisingly investment demand for gold was a key driver during the third quarter. Increasing levels of inflation, the US credit rating downgrade, a worsening eurozone sovereign debt crisis and the lackluster performance of many assets drove investors to increase holdings in gold in order to protect their wealth. Given gold’s proven risk mitigation properties, it is likely that investors will continue to seek protection from economic uncertainty, which shows no signs of abating.”

Central bank net purchases amounted to 148.4 tonnes, as they continued to increase their allocation to gold as a percentage of total reserves.