[BEIJING] China's gold consumption fell 25 per cent in 2014 as the price collapse that triggered an "extraordinary" surge in buying the year before wasn't repeated, the China Gold Association said.

Consumption declined to 886.1 metric tons from a record 1,176.4 tons in 2013, the Beijing-based group said in a statement on Friday. Demand for bars sank 59 per cent, coin purchases slumped 49 per cent and gold use in jewellery contracted 6.9 per cent.

Gold fell 1.4 per cent last year amid a rally in stock markets that damped interest in the metal as an investment and as an anti-graft drive in China hurt demand for luxury goods. Buying in China surged 41 per cent in 2013, spurred by a 28 per cent slump in prices.

"The precipitous drop in prices in 2013 led to an increase in demand of extraordinary proportions," the association said in the statement on its website.

"The relatively stable price in 2014 suppressed investment demand."

Comparing last year with 2012, a "normal" year for consumption, total demand would show a 6.5 per cent gain, including a 33 per cent jump in jewellery use, the group said.

The metal has advanced 6.9 per cent this year amid speculation the Federal Reserve may delay raising interest rates on concern that the world's largest economy won't be shielded from a slowdown overseas and as a rout in commodities threatens to keep inflation below its 2 per cent target.

Central banks from Europe to Asia are easing monetary policy to counter slowing growth and deflation, with the People's Bank of China this week cutting lenders' reserve requirements.

The demand slide comes amid an attempt by authorities in China to root out corruption among Community Party officials. The campaign "has strongly discouraged purchases of bars and coins, along with other luxury-gift items," the World Gold Council said in a report in August.

Bullion of 99.99 per cent purity on the Shanghai Gold Exchange traded at 255.15 yuan a gram (US$1,271.57 an ounce) at 3:10pm local time, up 6 per cent this year. The metal for immediate delivery was at US$1,268.17 an ounce in London, according to Bloomberg generic pricing.

Total bullion contracts on the SGE expanded 59 per cent to 18,490 tons in 2014, the association said in the statement. On the Shanghai Futures Exchange, gold trading volumes climbed 19 per cent to exceed 47,730 tons, it said.

China's demand for gold bars dropped to 155.1 tons in 2014 from a year earlier, coins consumption contracted to 12.8 tons, and gold jewellery usage declined to 667.1 tons, according to the association. Bullion used in industry slid 11 per cent to 43.6 tons, while demand for other uses of the metal fell 28 per cent to 7.5 tons, it said.

Production rose 5.5 per cent to a record 451.8 tons, the group said in a separate statement.

BLOOMBERG