Meanwhile, premiums skyrocketing in India as demand untamed by government restrictions

With the stock market making big gains this year, many Western investors have pulled capital from gold, primarily their holdings in exchange-traded funds, to focus on equities. Not so in Asia, especially China, where investors saw April's huge gold correction as a chance to buy metal on the cheap.

And according to the China Gold Association, they've been doing just that -- in droves. Gold consumption in China jumped 54% in the first half of 2013, reaching 706.36 metric tons in the first six months. "Gold-bar purchases surged 87 percent to 278.81 tons, while jewelry gained 44 percent to 383.86 tons," Bloomberg reported.

Demand "unmatched" during correction "China may overtake India as the biggest consumer as early as this year," said Zhang Wei, an analyst at Zhaojin Futures Co. "Demand in China has great potential to improve further as the country encourages private sector holdings."

"China bought a lot when prices fell below $1,350 in April thinking it will not fall further," said Chen Min at Jinrui Futures in Shenzhen. "They bought much more than usual in April and May to meet the need for later in the year."

"China's demand in April and May was unmatched," said one Shanghai-based trader. "They bought more than anyone and were consistent buyers even after prices recovered a little."

"Big mamas" driving China's gold rush
And guess who's doing most of the buying? Women. "Analysts say the purchases were powered by Chinese consumers, with female buyers known as damas a major factor," The Wall Street Journal reported. "Dama, which means something akin to 'big mama' in Chinese, conjures in China an image of a middle-aged woman who keeps a tight grip on the family purse and an eagle eye on gold prices in jewelry shops. Analysts say such consumers have helped stabilize prices at a time when investors globally have shed gold as the price of bullion has fallen."

"Older consumers -- women -- definitely took up a larger proportion of consumers in the gold rush," said Jiao Guangyi, deputy general manager of the All Love All Life gold store in Beijing. "They hadn't seen such prices in a long time so it was a big draw for jewelry and investment gold buyers."

"We are seeing a lot more of them," said Li Ying, a deputy store manager at a branch of the high-end Chow Tai Fook jewelry store in eastern Beijing.

India's imports rise despite hurdles
And though China is set to overtake India in gold consumption this year, don't count the latter out just yet even as its citizens grapple with new government restrictions, including a new 10% import tax, aimed to reduce the nation's account deficit.

According to Reuters: "Indians bought more gold in July than June despite a series of moves by the RBI to strangle supplies, and their insatiable appetite has forced neighboring countries to take steps to curb their own imports. India's gold imports hit $2.9 billion in July, up from $2.45 billion in June, official data showed on Monday, confirming Finance Minister P. Chidambaram's fears that despite hikes in import duties and steps by the Reserve Bank of India (RBI) to stem supply, demand is on the rise again."

And demand is being partly met through unofficial channels. That is, smuggling. "There are signs now that Indians may be bringing in gold through neighboring countries, pushing their imports sharply higher as well and prompting action by their governments," such as Pakistan, Nepal, and Sri Lanka, Reuters noted.

Premiums at record levels
Demand is so high and product is so scarce that "gold premiums in India, the world's largest consumer last year, may extend their advance to a record," said Bloomberg.

"The fees paid by jewelers to banks and other suppliers have jumped to about $40 an ounce over the London cash price from $30 in the week ended Aug. 2, said Haresh Soni, chairman of the All India Gems & Jewellery Trade Federation. Premiums may surge to $100 if the government doesn't ease the rules, said Bachhraj Bamalwa, a director at the federation, which represents about 300,000 jewelers and bullion dealers."

With China's economy showing signs of shaking off a slowdown, and India's love for gold still entrenched in its culture, Asian demand will play a key role going forward, especially during gold's seasonably strong fall months. If a stock market correction in the West occurs on tapering by the Federal Reserve or because of other factors, Western capital might follow suit in a flight back to quality and into gold. And that could mean "Katy, bar the door" for gold prices.