Demand for physical gold inChina may exceed consumption inIndia by the end of this year, said Chuck Jeannes, chief executive officer of Goldcorp, the world's No. 2 producer of the metal by market value. "Three or four years ago there was no one who would have expected Chinese physical demand for gold to surpass India," Jeannes said on Thursday from New York. "Now it looks like that could happen as early as the end of this year.

And that's while Indian demand is increasing." While global demand for gold is advancing on concerns about financial turmoil in the US and some European countries, consumers in China are buying larger amounts of the metal as an inflation hedge, Jeannes said.

Investment demand in China more than doubled in the first quarter to 90.9 metric tonne as the nation overtook India to become the largest market for coins and bars, the World Gold Council said in May. India was the largest consumer of gold jewellery last year, according to data compiled by Bloomberg. Gold reached a record $1,631.20 an ounce on July 27 in New York on concern about a potential US default and is heading for an 11th straight annual increase.

Consumer prices in China advanced 6.4% in June from a year earlier, the biggest gain since June 2008 and exceeding the government's target of 4%. The central bank has raised interest rates five times and the reserve-requirement ratio 12 times since the start of 2010 to stem inflation.

Deliveries on the Shanghai Gold Exchange jumped 20% in the first six months to 483.7 tons, according to Song Yuqin, deputy chairman of the exchange. Demand for gold in both China and India may help lift the price of the precious metal, said Jeannes, who said he expects gold to advance to $1,700 an ounce by the end of the year. "I predicted a $1,600 gold price at the beginning of the year, and am happy to see it there now," Jeannes said.

"I wouldn't be surprised to see it move significantly higher by the end of the year." Gold may be $1,510 an ounce in the December quarter, according to the median of 19 analyst estimates compiled by Bloomberg. Goldcorp, based in Vancouver, is second by market value after Toronto-based Barrick Gold, the world's largest gold producer.