China's demand for gold nearly tripled in 2008 as world gold demand pushed through $100 billion barrier with investors seeking safety from crumbling financial and stock markets and India scaling down consumption due to soaring prices.

China, the world's second-largest gold consumer after India, consumed 395.6 tonnes of bullion in 2008 for jewellery and investment, or around 14 per cent of global demand, up from 327.8 tonnes in 2007, according to the World Gold Council.

Investment demand in China jumped to 68.9 tonnes last year from 25.6 tonnes in 2007. India's total bullion consumption dropped 14 per cent to 660.2 tonnes in 2008, of which net retail investment slipped to 190.5 tonnes from 217.5 tonnes in 2007.

Sustained investor interest in gold against a backdrop of the worst year on record for global stock markets and many other asset classes, helped push dollar demand for the safe haven asset to $102 billion, a 29-per cent increase on year earlier levels, it said.

According to World Gold Council's Gold Demand Trends, identifiable gold demand in tonnage terms rose 4 per cent on previous year levels to 3,659 tonnes.

"Going forward, investment demand will remain robust in China because people are looking for an investment tool that they easily understand," said Albert Cheng, Far East managing director of the World Gold Council.

"It's a very good hedge against volatility in the financial markets. In terms of jewellery demand, the 24-carat jewellery demand is going very strong," he said.

An increase in investment helped offset declines in demand for jewellery in some countries in Asia and the Middle East such as Taiwan, Vietnam, Saudi Arabia and Egypt.

Gold rallied to its strongest in seven months at $985.95 an ounce on Thursday as risk-averse investors sought a safe, tangible asset in a global recession.

Gold has gone up as much as 12 per cent this year and is within sight of a record high of $1,030.80 struck last March, it noted.

"The outlook for Q1 2009 depends to some extent on the gold price. The rise to $900 an ounce during January brought new record highs in rupee terms," said the WGC in its review.

"However, the combination of gold's safe haven appeal and extreme uncertainty surrounding other asset classes should see consumers continue to take advantage of any dips in the price -- the investment motive to buy gold in the region remains strong."

Holdings of the SDPR Gold Trust have surged by more than 200 tonnes in 2009 to date. The trust's reserves jumped to a record 1,024.09 tonnes on Feb. 18.

"The investment demand figures look very positive and it simply reiterates the tone for the gold markets now as investors focus more on safe-haven plays in times when the global economy is faced with really tough times," said Adrian Koh of Phillip Futures.

"The surge in Chinese demand, I think, also shows the rising importance of Chinese investors and where they are putting their money. The same goes with the Vietnamese."

Over the year as a whole, the gold price averaged $872, up 25 per cent from $695 in 2007.

Demand for bars and coins rose 87 per cent over the year with shortages reported across many parts of the globe. The figures compiled independently for WGC by GFMS Limited, showed jewellery demand up 11 per cent in dollar terms at almost $60 billion for the whole year, but down 11 per cent in tonnage terms at 2,138 tonnes.

Jewellery and industrial demand in 2008 suffered with industrial demand down 7 per cent to 430 tonnes from 461 tonnes in 2007 amidst the global economic downturn. With the electronics sector the main source of industrial demand, reduced consumer spending on items such as laptops and mobile phones had a knock-on effect on gold demand.