Gold is set for its biggest weekly advance this year as unrest in the Middle East, rising inflation and a weakening dollar combined to fuel demand for the yellow metal as an alternative investment.

World gold demand grew 9 percent during 2010 to 3,812.2 metric tons, its highest level in 10 years, according to the World Gold Council. “This performance was mainly attributable to higher jewelry demand, strong momentum in key Asian markets and a paradigm shift in the official sector, where central banks became net purchasers,” The WGC said in their quarterly report. The WGC expects total demand to remain resilient across the jewelry, investment and technology sectors in the coming quarter.

India emerged as the strongest market for gold during 2010, accounting for 25 percent of global demand with total demand rising by 66 percent to 963 tonnes despite high prices. India’s jewelry demand climbed 69 percent for the year to 746 metric tons, while China’s hit a record 400 tons. China showed the most investment growth, with record demand for bars and coins of 179.9 metric tons that was up 70 percent from the prior year. China and India, collectively accounted for 51 percent of global jewelry, bar and coin demand for the year.

“Chinese demand is expected to increase during the year as economic growth in China remains strong, while Indian gold jewelry demand should show resilience in the face of higher price levels, with some opportunistic buying on price dips,” added the report. Buying in China and India was helped by strong economic growth and rising incomes, Eily Ong, of investment research with the WGC said. “They view jewelry as both an adornment and as an investment.” Indian gold jewelry tends to be 22-karat and China tends to be 24-karat, which is basically pure gold, she added.