In its Gold Demand Trends for 2011 report, the WGC highlighted a 0.4% year-on-year jump in global demand for gold to 4067.1 tonnes worth an estimated $US205.5 billion ($A191 billion).
According to the report, 2011 is the first year global demand has exceeded $200 billion and the highest tonnage level since 1997.
The main driver in demand growth was from the investment sector where annual demand was 1640.7t, up 5% on the record set the previous year and with a value of $82.9 billion.
The major markets for investment demand in 2011 were India, China and Europe.
The report highlighted that demand from the jewellery and technology sectors fell slightly in 2011 but remained resilient in the face of higher gold prices.
Gold hit a spot price peak of $1921 an ounce in early September but then slipped back to close the year at $1531/oz on the back of unprecedented volatility in the sector.
On the supply side, gold supply fell 4% year-on-year to 3994t while fourth-quarter gold supply came in at 1033.3t down 8% on the 2010 fourth-quarter.
Gold mine production for 2011 reached a new annual record of 2809t, up 4% on the previous year thanks to an increase in production across a number of projects in China, the US, Russia and a number of smaller African countries.
"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," WGC investment managing director Marcus Grubb said.
"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 demand terms.
"What is certain is that long-term fundamentals for gold remain strong, with a diverse and growing demand base, coupled with constrained supply side activity."
Looking ahead to 2012, the WGC believes investment demand has yet to meet its full potential and will continue to be driven by low real interest rates and inflationary pressures.
"Widespread very low or negative real interest rates provide a continued pillar of support to gold demand around the globe, particularly in the wake of the US Federal Reserve's recent statement that rates could be expected to remain ‘exceptionally low' through to at least late 2014," WGC said.
"Meanwhile, gold's role as an inflation hedge should bolster its appeal, particularly in countries such as India, China and Vietnam that continue to be afflicted by high inflation."
According to WGC, Europe will be a major area of focus in the investment sector in 2012.
"Ongoing difficulties in the region are deepening uncertainty over the future of the euro area and with no end currently in sight to the woes of Greece and Italy, will further stimulate investment demand," the report said.
It said demand for gold would also benefit from the recent moves by central banks towards increasing their gold holdings.
"Gold reserves held by central banks have increased by more than 500 tonnes over the last two years, as a number of banks, mostly in the developing world, have made significant purchases while sales dwindled to trivial levels," WGC said.
Meanwhile, China and India will remain the main global consumers of the precious metal in 2012; however, recent signs of an economic slowdown in China are likely to result in a fall in recent growth rates.