China's voracious appetite for gold spurs traders' bullish outlook

Gold sourcing might become one of the hottest terms of year, as analysts forecast gold prices to soar amid hoarding of the yellow metal in China.

Gold demand is surging in China, as the world's second biggest economy imported the biggest amount of the metal from Hong Kong ever recorded. The price of gold tends to move inversely with economic and political stability, as illustrated by the commodity's sharp rise over the past few years.

A recent Bloomberg survey of 23 gold traders found an overwhelmingly majority of those polled – 18 in total – expect gold prices to jump next week. Gold sales have continued to climb over the past year, with the U.S. Mint affirming it sold 85,500 ounces of American Eagle gold coins in the first 12 days of this month.

Rising gold prices have squeezed profits at many jewelry makers. While luxury brands have offset the uptick in price onto customers, many stores have instead opted to implement business cost reduction programs.

While gold surged in 2011 on economic and political instability throughout the globe, China's frenzied market is driving price gains thus far in 2012, according to Sharps Pixley chief executive officer Ross Norman.

"The thing that’s caught people's minds is the massive increase in Chinese buying," he said. "Gold has demonstrated time and time again its ability to hold purchasing power. It looks expensive and people talk about bubbles, but it's not."

On the New York Mercantile Exchange on Friday, gold futures for February delivery climbed 0.58 percent to close at $1,640.30 per troy ounce.