Bearish investors drove demand for gold to near-record highs of $44.5 billion in the second quarter of 2011, with India and China emerging as the largest markets for bars and coins. 

According to recent figures from the World Gold Council, India and China accounted for 52 per cent of total bar and coin investment and 55 per cent of global jewellery demand in the quarter. 

Despite the high price for gold, Indian demand rose 38 per cent in the period, while Chinese demand rose a quarter. The WGC said in a statement that this is likely to continue over the next few quarters due to rising levels of economic prosperity, high levels of inflation, and forthcoming key gold purchasing festivals.

"The strength of demand in India and China, coupled with an overall drop in recycling activity this quarter, demonstrates that consumers have adjusted to the current price environment and expect the upward price trend to continue. In addition, ongoing macro economic uncertainty, the continued sovereign debt crisis and widespread inflationary pressures, will result in gold demand remaining strong," said Marcus Grubb, the managing dierctor for investment at the World Gold Council. 

Demand for gold bars and coins totalled 307.7 tonnes in the second quarter, up 9 per cent from the year-earlier period. In value terms, bar and coin demand translated to $14.9 billion, an increase of 37 per cent from $10.9 billion in the second quarter of 2010. Jewellery demand totalled 442.5 tonnes, up 6 per cent to $21.4 billion in value terms. 

The full report may be viewed here.