Chinese investors are buying up gold as inflation jitters proliferate.

In the second quarter, China's demand for gold jewelry edged up 16 percent year on year to reach 102.9 tons while its demand for gold coins and bars jumped 44 percent to 53 tons, said the World Gold Council (WGC).

China and India accounted for 52 percent of total bar and coin investment and 55 percent of global jewelry purchases, said the WGC.

The growth in the two Asian markets, which have a traditional preference for gold, is likely to continue due to increasing economic prosperity, high levels of inflation and upcoming traditional festival and holiday seasons, said the WGC.

"Gold buying trends, particularly in China, should also be supported by improved access to the market, with banks actively promoting gold investment products," said Marcus Grubb, Managing Director of Investment at the WGC.

While the longer-term outlook appears favorable, the market is likely to experience a bumpy transition, said the WGC. Disposable income, particularly among a younger demographic, could be directed toward consumer electronics and an expanding array of financial and saving products will compete with gold.