TANIA BRANIGAN, BEIJING

Demand for gold is unprecedented in China.

THE assistant pushed the red velvet sacks across the counter discreetly. The customer quickly slipped them into her bag. With a brief, nervous look around, she walked briskly from the shop, already clutching her car keys.

Few people feel comfortable lugging around a kilogram of pure gold, but that doesn't stop Chinese shoppers from thronging to Caibai, the No. 1 place for buying the precious metal. The Beijing store is at the forefront of a new gold rush.

Since 2007, when South Africa fell behind, China has been the world's biggest gold producer. Now the World Gold Council and industry analysts believe it may have overtaken India, for centuries the dominant buyer, to become the biggest consumer too. The China Gold Association estimated demand would exceed 450 tonnes last year, up from 395.6 tonnes in 2008 (the actual figures are not yet available).

Much of the gain is recent. In the third quarter of 2009, gold demand in mainland China soared 12 per cent year-on-year to a record high of 120.2 tonnes. Internationally, demand for jewellery was down 30 per cent, but in China it rose 8 per cent to 93.5 tonnes while retail investment rose 30 per cent to a record 26.8 tonnes.

Albert Cheng, Far East managing director for the World Gold Council, points out this is partly because China's continued economic growth is enabling consumers to indulge in a favourite luxury.

''The Chinese have a deep affinity for gold which dates back thousands of years,'' he said. ''No marriage will be ideal if the bride does not receive gold jewellery.''

China is hardly the only culture to prize gold. But the council, which is funded by mining companies, has spotted something distinctive about its consumers. In India, Turkey and the Middle East, buyers have been deterred by the soaring cost of the metal. In China, however, it noted in a recent report, ''the rising gold price is seen as a positive factor - consumers like to buy into a rising price''.

That is why, on busy days, 10,000 people pass through Caibai's doors. In 2008, the company sold gold worth 3.5 billion yuan. In the first 11 months of 2009, it sold 4.1 billion yuan. Shelves are stacked with solid gold statuettes: busts of Chairman Mao and majestic galleons. Every item is labelled by weight, and charged according to the metal's price on the day of sale.

But a glass case close to the entrance - and closer to security guards - offers a clue to the hottest draw.

Inside sits a 50-kilogram, 24-carat bar: so big, it looks as though it should be made of chocolate and covered in foil. Upstairs, shoppers are buying smaller versions.

''This is the first time I've invested in it,'' said Ji Junqing, a 38-year-old accountant, hugging her treasure-filled handbag. ''I used the stock market before, but I think this is more stable. I've been reading about it in all the newspapers and magazines, so I'm putting in about 20 per cent of my assets.''

Gold looks attractive to the Government too. Last year, Beijing revealed it had been buying gold since 2003, increasing its holdings from 600 to 1054 tonnes. Yet while some experts predict a long-term rise in the gold price, others fear the price could fall sharply. In 1999, at its lowest, gold was worth just $US252.80 an ounce. No one expects it to plummet to that level, or to drop tomorrow. But it may not always look so glittering to today's eager Chinese buyers.

GUARDIAN

http://www.theage.com.au/business/golden-days-rush-through-china-20100126-mwfx.html