Gold consumption in China, the world's largest user after India, jumped 54 percent in the first half of 2013, putting the country on track to become the top bullion consumer at a time when demand is contracting elsewhere.

Consumption reached 706.36 metric tons in the first six months, the China Gold Association said today in an e-mailed report. Gold-bar purchases surged 87 percent to 278.81 tons, while jewelry gained 44 percent to 383.86 tons, it said. Demand accelerated from growth of 26 percent in the first quarter, according to data from the association, which is funded by miners, refiners, retailers and jewelry makers.

Gold is heading for its worst year in three decades as some investors lost faith in the metal as a store of value and amid speculation the U.S. Federal Reserve will curb debt-buying. India doubled a tax on inbound shipments and curbed financing to tackle a surge in demand after the metal entered a bear market in April. China is the world's largest gold producer.

"China may overtake India as the biggest consumer as early as this year," said Zhang Wei, an analyst at Zhaojin Futures Co. in Zhaoyuan. "Demand in China has great potential to improve further as the country encourages private sector holdings."

David Fuller's view Gold's price action (weekly & daily) has provided another small hint that it is in a bottoming out and support building phase. Over the last three days gold has recovered most of the losses seen during the previous setback following the rally high in July. This indicates that some demand is occurring in addition to short covering, and a close beneath $1270 would be required to suggest that a further retracement of recent gains since the low at $1180.5 on 28th June is occurring.

Interestingly, recently underperforming silver (weekly & daily) has done somewhat better in the last three days by clearing its June highs. Also, four upward dynamics are evident on the daily chart since late June. Previously, we had seen few of them this year, in contrast to the downward dynamics indicating selling pressure. A close under $19 is now required to indicate a retest of the low and to offset current scope for a further recovery.