Montreal, Canada

When most investors are bearish about an asset, the opposite performance usually occurs.

Last week, Barclays Capital conducted an institutional survey in Europe and discovered that none of the 100 money-managers were particularly enthusiastic about gold in 2011. The metal received the second-highest share of votes for worst-performer; only natural gas fared worse.

However, another survey released on Monday was far more influential.

The People’s Bank of China, who last year commented on the “unlikely appreciation” of gold in 2010, revised its outlook and issued a rather bullish price assessment.

I suspect the major driving force for gold prices going forward lie in the massive shift in domestic consumption now underway in China. And demand is not just coming from the Chinese government; for the first time since the creation of the Communist state in 1949, citizens are allowed to purchase gold, including gold ETFs traded in China. It’s amazing how the market continues to underestimate the long-term purchasing power of 1.3 billion people.

Since the commencement of this secular commodities bull market in late 2001, the Chinese have ranked as the single largest demand source for key raw materials. You can bet that whatever the Chinese accumulate will eventually result in sharply higher prices over time; this includes the entire gamut of base metals, crude oil, refined products and recently, several agricultural products like corn and soybeans.

Over the last decade China has gone from net exporter to net importer of several core commodities, including crude oil, copper, coal, iron ore, aluminum, soybeans and corn.

And even if China’s currently the world’s largest gold producer, the odds favor a deficit at some point as above-ground supplies decline amid bulging demand. Truth is, nobody really knows how much gold is produced in China or how much the People’s Bank of China really holds.

Gold prices hit an all-time high last week just shy of $1,450 an ounce. The spot price continues to draw impressive support above the $1,400 an ounce threshold, despite high volatility recently as events in the Middle East, Japan and Europe drive investors into safe-haven assets. However, risk is “back on” since March 21 as global investors seemingly discount an escalation of tensions in the Middle East and in Europe’s bond market periphery. Gold has come off but silver prices continue to draw a firmer bid.

Ignoring the trends in Chinese long-term consumption is a one-way bet to the poorhouse. Smart investors know where the money is and that means buying the commodities the Chinese need to import to feed her infrastructure development and populace. Going forward, this implies gold, silver, copper, crude oil, corn, soybeans, coal and a host of other raw materials.