Physical gold sales in China have confounded predictions that demand for the precious metal would fall and have in fact put gold purchases in 2010 equivalent to almost 1.7 per cent – over twice the level of five years ago – according to new figures by BullionVault, the gold and silver exchange.

China is noted for having a strong savings culture and according to BullionVault the country's savers are putting ever-increasing amounts of money into physical gold. Western analysts had predicted that the increasingly wealthy Chinese would start to spend more on consumer gadgets rather than gold jewellery and ornaments, but this has proven not to be the case, with growth in gold demand far outstripping consumption growth.

Disposable income growth has risen in China by as much as 15 per cent annually since 2000, yet “consumption growth is anaemic,” said Michael Pettis, professor of finance at Peking University, in a release by the firm. In stark contrast is the fact that the World Gold Council has estimated that private Chinese gold demand has risen by 26 per cent annually over the past decade.

In fact, so popular is gold among Chinese citizens that the WGC has reported that in the 30 months between January 2008 and June 2010 private households bought more gold (1,057 tonnes) than the People’s Bank Bank of China has in its entire reserve (1,054 tonnes).