After last year's massive bullion buying spree, China's gold fever is set to cool in 2014 as consumers grapple with a slowing economy, said World Gold Council (WGC).
"The sudden price drop in 2013 meant some Chinese consumers brought forward jewelry and bar purchases, which may limit growth in demand in 2014," the industry body representing gold miners wrote in a new report on Tuesday.
The surge in demand brought about by lower prices saw China surpass India as the world's top consumer of physical gold in 2013. The mainland accounts for 26 percent of global private sector gold demand, making it a key driver of the bullion market.
However, consumer spending could come under pressure this year from decelerating economic growth and constrained credit markets.
"It would be prudent to assume a more or less flat outcome for consumption in 2014," WGC said.
Regardless, it is positive on the prospects for Chinese demand in the coming years on consumers' increasing purchasing power.
WGC forecasts China's annual demand for gold could rise 20 percent by 2017, to at least 1,350 metric tons from the current 1,132 metric tons per year.
"[China's] pool of private savings is vast with further scope for consumers to increase their exposure to gold," it said.
Chinese households collectively hold an estimated $7.5 trillion in bank accounts, with allocation to gold at around $300 billion, reflecting room for further growth.
"In addition, domestic gold prices will most probably remain at attractive and affordable levels during the next few years,"
After suffering its worst annual performance in more than three decades in 2013, gold prices seemed to have stabilized around the $1,300 per ounce level. However, banks including Goldman Sachs, expect bullion to resume its downtrend and end the year at $1,050, as the pickup in global economic growth reduces demand for the safe-haven metal.
"Barring a major, unexpected economic setback it is hard not to be optimistic about growth in Chinese consumers' purchasing power over the medium-term," it said.