The WGC said there was positive tonnage growth in the investment and industrial segments and double-digit dollar growth in the jewellery sector.
The record dollar values for overall demand and jewellery demand occurred despite a fall in supply, reducing the quantity of gold purchased.
The 2006 figures, compiled independently for the WGC by GFMS, reveal that identifiable investment demand in 2006 was 7% higher than in 2005 in tonnage terms, (637t vs 596t) and 45% higher in dollar terms, spurred by a 27% year on year tonnage increase in holdings of gold Exchange Traded Funds and similar products.
The fourth quarter was particularly strong with a 19% rise in tonnage terms and a 51% increase in dollar terms, the WGC noted.
Jewellery demand up 14%
Jewellery demand rose 14% in dollar terms in 2006 as a whole, but fell back by 16% in tonnage terms due to a volatile gold price in the first half of the year.
In the industrial sector, demand rose by 7% in tonnage terms and 45% in dollar terms to set a new annual record.
Industrial demand was at its highest ever at 458 tons, while jewellery sales reached an all time record in US$ terms at $44bn.
James Burton, chief executive of the World Gold Council said: "We are very encouraged by the record value of gold demand in 2006, showing that consumers are spending more on gold as jewellery and as an investment.
"However, we must recognise that although we have seen a steep rise in the dollar value of gold demand, there was also a decline in tonnage demand as extreme price volatility impacted consumers' jewellery purchases."
Price volatility
The first half of the year proved a difficult one for the gold jewellery market as high price volatility deterred consumers from buying. However, more stable prices towards the end of the year resulted in a very satisfactory level of demand.
"I am particularly pleased to see the continued growth in demand for gold in industry.
"Gold's unique properties make it ideal for use in the development of medical applications, pollution control, air bags, mobile telephones, laptop computers, and many other things that we consider indispensable in today's society."
Supply fell 13% in tonnage terms including a sharp reduction in net selling by central banks.
The WGC said 2007 began with brisk demand in most jewellery markets in January, while investor interest has also remained positive. Market research findings show that sentiment towards gold jewellery in key markets remains strong.
Prospects for both jewellery and investment demand in the first half of the year are good, although any return of excessive price volatility could hinder jewellery purchases, the WGC concluded.
