In Europe, Germany and Switzerland were the main drivers of the growth as the euro zone debt crisis escalated and investors looked for safe havens, according to the World Gold Council ’s annual report.

While the jewelry market was resilient, the gold investment market grew more, with a 5 percent increase in annual demand.

Total demand around the world rose to 4,067 metric tons, worth around $206 billion—the first time annual demand for gold has risen above $200 billion.

Gold hit a record price of $1,895 per ounce in September last year as fears about contagion in the euro zone spread.

India is still the country where most gold is sold, despite the recent weakness of the rupee, with around 500 metric tons of gold jewelry sold in 2012, and total demand of 933 metric tons.

There was a hefty increase in Chinese demand, which led the WGC to predict that China would be the biggest buyer of gold in the world next year.

Central banks also hiked their purchases from 77 metric tons in 2010 to 440 metric tons in 2011 as worries about a second global recession grew.

“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,” Marcus Grubb, managing director of investment at the WGC, said in a statement.

“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.”

Greg Hawkins, chief executive of gold miner African Barrick Gold , told CNBC Thursday: “We see strength every time the gold price comes off a little bit. We have seen a lot of strength in China.”

He added that he is “happy” with the current price of gold and thinks “it has legs.”

The miner, which operates mainly in Tanzania, reported a 30 percent rise in core profit Thursday, and tripled its dividend to 16.3 cents per share. However, its cost of production is rising, which could dampen the company’s share price.