With the start of the Year of the Rat, Chinese have been forming queues across the country to buy solid gold rodents. Last year they queued to buy solid gold pigs. The surging desire for the precious metal from increasingly well-off Chinese fuelled a 26 per cent increase in demand in 2007.

The soaring price of gold, which hit a record $948.60 an ounce yesterday, has failed to dim the Chinese rush. China's demand climbed to 326.1 tonnes, supplanting the United States as the world's second-largest gold consumer and exceeded only by India.

Of the total, 302.2 tonnes were bought for jewellery, the World Gold Council said, marking the first time that jewellery demand in China had exceeded the 300-tonne mark.

For centuries China has placed a premium on gold, valuing the softest, purest and most yellow form of the metal for jewellery and to show off wealth. The rapidly rising purchasing power of the Chinese consumer has given a much freer rein to this traditional gold fever. A larger class of new rich created by a booming economy is on the hunt for new investment opportunities, and the rising price of gold has proved a powerful lure. With the stock market in China turning somewhat bearish in the past few months, more people have been rushing into gold as a safe haven.

Demand for gold in China soared in the last quarter of 2007, coinciding with increasing volatility on the Shanghai stock market. In the three-month period, China saw year-on-year growth of 20 per cent in gold jewellery sales. China's rising inflation, which hit an 11-year high of 7.1 per cent in January, has also spurred more people to put their savings into gold. For 2007, demand for gold in the United States fell by 14 per cent year-on-year, while the market in Britain and Italy also dipped.

The World Gold Council said that China had played a significant role in 2007 in adding momentum to the world gold market.

China may still have some way to go before it becomes the world's largest market for gold — India took 773.6 tonnes last year, compared with America's demand for 278.1 tonnes.

However, the moment when China overtakes South Africa to become the world's largest producer of gold may be much closer. It produced 270.29 tonnes last year, up 12.67 per cent from 2006 and leaving it only two tonnes short of South Africa's output.

Zhou Hongtao, a gold analyst, said: “South Africa has been the biggest gold producer since 1905. However, China is going to challenge its position.”

— Barrick Gold, the world's leading producer of the precious metal, will pay about $1.7 billion (£870 million) for the 40 per cent stake in the Cortez joint venture in Nevada owned by a subsidiary of Rio Tinto.

Greg Wilkins, the chief executive, said that Cortez was expected to contribute almost one million ounces of gold annually to the company's production. The acquisition will increase Barrick's share of proven and probable reserves by 4.6 million ounces to 11.5 million ounces.

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