While the Shanghai Composite is up just over 100 percent from where it traded a year ago – it has ceded ground in recent weeks sliding 13 percent last week and a further 6.4 percent this week.
Capital Economics said it expected gold demand from China and India to remain strong this year, rising by 8 percent and 11 percent year-on-year respectively. India was the world's biggest importer of gold last year, followed by China, according to the World Gold Council.
The demand from China and India should help gold prices reach $1,400 per ounce by the year end – implying a gain of about 19 percent from current levels around $1,173.
Analysts said jitters over Greece should also help underpin support for safe-haven gold.
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"The shining metal is gaining its shine back and in the process of obliterating its biggest weekly decline since March," Naeem Aslam, chief market analyst at AvaTrade, said in a note Friday. "That's' thanks to Greece uncertainty, which is throwing a lifeline for the safe haven."
Greece and its international creditors failed to reach a successful conclusion on Thursday, with further talks set to take place on Saturday. The deadlock in talks has raised the risk of default in Greece and the country's possible exit from the single-currency club.