China gold consumption set to cool in 2014
While China has been a key source of gold demand this year, helping to offset selling from exchange-traded funds (ETFs) and a pullback in Indian consumption, the country's bullion imports may slow in 2014, according to ANZ.
"Caution is warranted in expecting that the import growth of 2013 will be repeated next year. Over the medium-term, rising real interest rates and poorer capital returns for gold will reduce its desirability as a store of wealth," Victor Thianpiriya, commodity strategist at ANZ wrote in a report.
Gold prices have plunged around 28 percent over the past 12 months - the fourth largest fall over any one-year period since the 1970s - lowering the attractiveness of the precious metal.
(Read more: Gold demand slumps as Indian consumption shrinks)
As a result, ANZ expects China's imports to pull back 10 percent to 900 million tons in 2014, from a forecast 1,050 metric tons this year. Nevertheless, this would represent the country's second highest level of imports on record and could surpass India for the second year running.
China is expected to overtake India as the world's largest gold consumer this year as the Indian government's crackdown on gold imports, coupled with weakness in the rupee, suppress demand in the South Asian nation.
(Read more: India's gold fever cools this Diwali)
Thianpiriya also notes that the fall in prices below $1,200 in June triggered a front-loading of consumption during the first half of the year, somewhat cannibalizing future demand.
"Those who missed the rally the first time saw a second chance to buy. Investment demand in the first three quarters of 2013 reached 780 million tons, exceeding investment demand for the whole of 2012. However, we view this growth as mostly a temporary response to the sharp fall in price," he said.
Retail investment demand for gold - including jewelry and physical bar - makes up 90 percent of China's gold demand.
China is the world's largest producer of the yellow metal, but relies on imports for 70 percent of its gold consumption.
(Read more: Goldman predicts steep losses for gold in 2014)
Softer-than-expected demand out of the China is a factor behind the bank's downward revision to its gold price forecast for 2014.
It expects an average gold price of $1,269 next year, compared with an earlier forecast of $1,436.
—By CNBC's Ansuya Harjani; Follow her on Twitter: @Ansuya_H