Gold investment in China, the second-largest consumer after India, may gain 40 percent to 50 percent this year as investors increase purchases of the precious metal as a store of value, said the World Gold Council.

“Chinese investors have shown great enthusiasm amid lack of other alternative investments,” Wang Lixin, China representative for the council, said today in Beijing. Wang said the forecast was a “conservative estimate.”

Gold reached a record in December and soared nearly 30 percent last year as the dollar dropped and investors sought a store of value amid currency debasement. China’s consumer prices increased 4.9 percent in January from a year earlier, exceeding policy makers 4 percent inflation ceiling for a fourth month, data showed this week.

“The main motivation behind this demand has been concern over domestic inflation pressure and poor performance of alternative investments, combined with expectations of further gold price gains,” the council said in a report released today.

Investment demand in 2010 jumped 70 percent and consumption by the jewelry sector gained to a record, it said. Investment was 179.9 metric tons, surpassing Germany and the U.S., as buyers sought out gold bars and coins, according the London-based industry group.

Demand from the jewelry sector was 400 tons, it said.

“We also expect the Chinese jewelry demand to expand 8 to 10 percent this year,” Wang said. Bullion gained 0.3 percent to $1,378.35 an ounce at 6:04 p.m. in Shanghai. The metal reached the highest ever price of $1,431.25 on Dec. 7.

Consumption in China may gain 15 percent in the first half, fueled by growing demand for alternative investments and a hedge against inflation, the China Gold Association’s deputy chairman Zhang Bingnan said last month.

China displaced South Africa as the world’s biggest gold producer in 2007. Imports through October rose almost fivefold from the total shipped in the previous year to 209 tons, according to the Shanghai Gold Exchange. Mine output reached a record 340 tons last year, the China Gold Association said.

The Industrial and Commercial Bank of China Ltd, the world’s biggest lender by market value, started physical-gold linked savings accounts in December in an initiative with the World Gold Council. Account openings surpassed 1 million with over 12 tons of gold stored on behalf of investors, it has said.

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