Chinese demand for gold bars and coins as private investments could push bullion imports above 400 tonnes (metric tons) in 2011, leading global consultancy GFMS said on Friday.

Increased appetite for silver investment products too, combined with a forecast 16 percent annual growth in industrial demand, means China's total silver consumption could outstrip domestic supply this year, said Philip Kalpwijk, executive chairman of GFMS.

"There is a widening demand for silver as investment in China because of its lower entry point. It is also being increasingly recognized as an physical investment asset, which will support demand," Kalpwijk told a conference in Shanghai.

The Chinese government does not publish official statistics on gold imports but the World Gold Council said China produced 340 tonnes of gold in 2010.

Total consumption was about 700 tonnes, leaving a gap of around 300 tonnes made up by either imports or sales of existing stocks last year.

The surge in imports, which jumped fivefold last year, has turned China, already the largest bullion miner, into a major overseas buyer. GFMS' forecasts imply imports will continue to grow at a robust pace despite high gold prices .

The explosive demand has been stoked by concerns about inflation and poor returns in the stocks and property sectors. It also been aided by Beijing's encouragement to retail consumption, such as expanding the number of banks allowed to import bullion.

GFMS said China's investment demand for gold could hit 300 tonnes this year, up from 200 tonnes in 2009. Investment demand for silver stood at around 260 million tonnes in 2010, the group said, without giving a forecast for 2011.

Forecasts by state-owned miner China National Gold Group were more conservative.

It predicted China's bullion output to reach 400 tonnes by 2014, a gain of nearly 19 percent from 2010. Consumption was set to grow by nearly a quarter to 700 tonnes, implying a supply shortfall of about 300 tonnes in three years.

Demand from China, along with inflation worries amid a weak dollar has pushed gold prices to a series of record highs.

Bullion struck a record above $1,575 in early May. Silver touched a record at $49.51 in late April before falling sharply on a broad sell-off in commodities and after exchange operators in Shanghai and New York raised the
amount of money required to trade.

Gold's decade-long price rally could take the metal above $1,600 an ounce by year-end, metals consultancy GFMS said in a widely anticipated industry report as investors' appetite for gold sharpens further.

Surge in Paper Trades

The investment frenzy in China has also led to booming trading volumes in the spot and forward markets on the Shanghai Gold Exchange, said the exchange's president Wang Zhe.

Total gold traded on the exchange rose 28.5 percent from a year ago to 6,051.5 tonnes in 2010, while the total turnover jumped 57 percent. Trading volume for silver was 73,615 tonnes in 2010, a meteoric 353 percent rise from a year ago, Wang told a conference on Thursday.

The SGE, China's only specialized precious metals exchange, started a trial of over-the-counter trading in April and Sun said the exchange was also studying ways to establish a platform to provide open gold lease rates in China.

China National Gold Group's President Sun Zhaoxue said Beijing's move to consolidate the gold mining sector, improve technology and encourage exploration at depths exceeding 1,000 meters would combine to boost underground reserves and output.

China's gold output in the first three months of 2011 totaled 73.4 tonnes, up 4.6 pct from the same months of 2010, the Ministry of Industry and Information Technology said.