China has overtaken India as the world's largest gold consumer thanks to soaring purchases of jewelry, minted Panda coins and small gold bars.
According to the Thomson Reuters GFMS gold survey, the most widely followed report on the industry, Chinese demand reached 1,189.8 tons last year, a 32 percent year-on-year jump and a fivefold increase since 2003.
(Read more: Chinese gold imports may fall as buying frenzy calms)
Its hungry factories and mushrooming cities had already made China the number one global consumer of industrial metals such as copper, aluminium and zinc.
The frenetic buying of gold in China, which led to a temporary shortage of physical stocks, was sparked by the 28 percent fall in the precious metal's price last year, the worst performance in more than three decades.
(Read more: China gold consumption set to cool in 2014)
Following a 12-year bull run, gold lost its lustre in Europe and North America as economic conditions improved and the prospects of inflation receded. Western investors dumped gold-backed exchange traded funds in 2013, with holdings falling by 880 tons.
A simultaneous "Asian-led buying frenzy", with consumers chasing bargains, resulted in gold bars being removed from vaults in Europe and other markets, melted into smaller bars in Swiss refineries, and shipped to the East. GFMS described the flow as the "largest movement of gold, by value, in history".
Indian consumption rose 5 percent to 987.2 tons last year, but was held back by new import tariffs and restrictions. In China there were no brakes. Gold jewellery fabrication rose nearly a third to 724 tons, surpassing India for the first time, and the retail sector boomed. In July and August, more than 200 gold showrooms opened in the southern city of Shenzhen.
Because many Chinese buy jewelry for investment reasons rather than adornment, high purity 24 carat gold products dominated sales. Purchases of physical bars – mostly kilobars and smaller weights – rose 47 percent to 366 tons, a new record. In terms of gold coins, only Turkey minted more than China in 2013.
(Read more: Gold isn't the only precious metal in 2014)
"Gold has always been popular culturally in China and now it's increasingly seen as an asset class for individuals," said Andrew Leyland, manager of precious metals demand at GFMS. "Greater wealth and disposable incomes created pent-up demand when prices were high, so when they dropped there was this phenomenal surge in buying."
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Were it not for Chinese purchases, the gold price would have been at risk of further falls. Outside Asia, investor appetite for the metal has remained weak, and few analysts expect the gold price to recover this year. GFMS forecasts an average price for 2014 of $1,225 a troy ounce – around $20 below current level – with physical demand remaining solid "but without a repeat of the bargain hunting surge".
In recent years, China has also become the world's biggest gold producer, with estimated output of 437.3 tons last year. Although there are no official figures, some of that metal is thought to have been purchased by the People's Bank of China. The central bank last reported holdings of 1,054 tons, in 2009.