China overtook India to become the largest market for gold bars and coins in the first quarter of this year, as rising inflation inspired a surge in bullion investment.
Chinese investors bought 93.5 tonnes of gold between January and March in the form of coins, bars and medallions, a 55 per cent increase from the previous quarter and more than double the level of a year earlier, according to data released by the World Gold Council on Thursday.
The surge in Chinese buying has supported prices, even as some investors in the west were cutting exposure to gold amid expectations that improving economic conditions and rising interest rates would mark an end to the gold rally.
George Soros's hedge fund sold almost all its holdings in the largest gold exchange-traded fund, SPDR Gold Shares, in the first quarter, according to a regulatory filing this week.
"You're seeing eastern demand picking up any of the gold coming out of the hands of western investors," said Marcus Grubb, managing director for investment at the World Gold Council, a lobby group backed by the gold mining industry.
India, the top buyer of gold jewellery, remains the largest overall consumer of the yellow metal, although Chinese jewellery consumption is rising rapidly.
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