China's sales of gold jewelry probably remained flat at around 278 tons last year because of high prices while demand for investment-grade gold will grow this year, the World Gold Council said in an estimate report yesterday.

The value of gold jewelry sales surged, however, in terms of value as prices gained 25 percent, said Albert L. H. Cheng, managing director-Far East of the World Gold Council.

He did not provide an estimate on the total. Final figures for 2006 will be released in March, the company said.

Gold surged to more than US$720 an ounce in the second quarter of last year, dampening demand for gold jewelry. The high prices mainly affected China's appetite for 24-carat, or 99.9 percent pure, gold jewelry.

K-gold, or 18-carat gold, is less sensitive to price fluctuation as it is priced by the piece rather than by weight.

Sales of K-gold jewelry, which is 75-percent pure, were estimated to have topped 40 tons last year, accounting for up to 18 percent of China's gold jewelry market, said Wang Lixin, general manager of the council's China market.

The figure was only around six tons in 2003 when the council started to promote 18-carat gold jewelry in China.

Despite the flat jewelry sales, gold investment is set to boom in China, Cheng said.

The council is lobbying the State Taxation Administration to trim its tax system for promoting gold bullion trades at banks. The 17 percent value-added tax is troubling banks that sell gold bullion on behalf of other agents.

"We hope there will be a breakthrough this year," Cheng said.

Average gold prices are expected to settle around US$652.38 an ounce this year, according to a forecast from 29 analysts participating in a London research report. The prices are expected to fluctuate from US$500 to US$850 an ounce this year.

China is the world's third-biggest gold consumer, as its citizens consider the precious metal to be a safe heaven against inflation and a symbol of fortune.

China deregulated its gold market in late 2002, when the Shanghai Gold Exchange started to allow gold producers, corporate users and banks to trade in begin trading in the metal.