"Gold has benefited from the growth in this market, although supply chain cost pressures continue to drive some manufacturers to seek cheaper alternative materials to gold. Apart from the modest decline in Japanese output, most of the other major markets recorded healthy gains for the period. China again led the way with a year-on-year rise of almost 20 percent.

"The country is becoming an increasingly important center for electronic component manufacturing and assembly," the council says. "It is perhaps not surprising therefore that increased use of gold in Chinese electronics manufacturing helped fuel global electronics demand in 2010."

All these will help China become a significant player in fueling growth in the gold sector. "The strength of demand in China, coupled with an overall drop in recycling activity, demonstrates that consumers have adjusted to the current price environment and expect the upward price trend to continue," the WGC's Grubb says.

"In addition, ongoing macro economic uncertainty, the continued sovereign debt crisis and widespread inflationary pressures, will result in gold demand remaining strong."

The global economic situation has pushed Chinese investors to look for safer investment channels. Provided to China Daily