China is expected to overtake India and become the world's largest gold consumer, a leading precious metals consultancy said yesterday. With gold prices at close to record levels, China's demand is forecast to reach 432 tonnes this year compared with 422 tonnes for India. China became the largest gold producer in 2007 when it overtook South Africa. 'To answer the question, will China overtake India to become the world's top gold consumer, according to our forecast, it looks as if it is happening this year,' GFMS executive chairman Philip Klapwijk told a gold conference in Shanghai. Gold has hit successive records this year, soaring 37 per cent to US$1,207 an ounce yesterday, close to the record set on Thursday of US$1,225. Concerns over the weakness of the US dollar have seen sharply higher investments in commodities this year, with gold being one of the main beneficiaries. But there are also other factors at play. Central banks are the biggest holders of gold, and between 2000 and 2005 they have been big sellers. But the rate of sales has declined sharply in recent years and this year could see the lowest level of central bank sales for 15 years, according to Societe Generale Asset Management. Indeed, there are signs the trend is reversing, with India's central bank buying 200 tonnes of gold from the International Monetary Fund in November. Sri Lanka and Mauritius have also purchased gold from the IMF and there is speculation that China might follow suit. This has put upward pressure on gold, according to analysts. China said in April its official gold holdings had risen to 1,054 tonnes from 600 tonnes in 2003, by buying on the domestic market and from domestic producers. At present its gold holdings represent less than 2 per cent of its US$2.27 trillion of foreign exchange reserves, which are mostly held in US Treasury bonds. This compares with the international average of 10.2 per cent. At the same time the industrial market for gold is growing. The metal is increasingly being used, for example, in the protection of satellites, while 200 to 300 tonnes per year are used in micro-processor connectors. At the same time the production of gold by miners has been in decline. As a result of soaring costs, gold production hit a 12-year low, according to Societe Generale. There is a seasonal effect, with demand for gold often at its strongest between September and January. This period takes in India's Diwali holiday, Christmas and Lunar New Year, when demand for jewellery is strongest. However, India is proving to be more price sensitive than China. While spending on jewellery has held up in China despite the price rise this year, it has declined in India. Bullion imports in India fell for a fifth month in September to 50 tonnes from 54 tonnes a year ago, as high prices cooled demand for jewellery. With prices at record highs it is unclear where they will go from here. Commodities guru Jim Roger, who in the 1990s predicted the bull run in the sector, expects gold will hit US$2,000 an ounce. Economist Nouriel Roubini, one of the first to sound warnings of the subprime mortgage crisis, has dismissed this as 'utter nonsense'.