China Business Daily Reports China Is Considering Raising Gold Reserves
The country which has languished in 6th position in the world, with combined gold holdings of 1,054 tonnes (just behind the GLD ETF), may have finally awoken that it needs to buy about 7,000 tonnes of gold to catch up with the US, and its 8,133 tonnes (or even France with 2,435). China daily 21st Century Business Herald has just reported that: "China is considering raising its gold reserves, a move which would push
up gold prices in the future, a person providing consulting services to
the Chinese government said." Conveniently, China can now buy gold notably cheaper courtesy of a $100 dip in gold price as recorded over the past week, precipitated by... China inflation concerns. When next month the politburo reports below consensus inflation (as the number is imaginary to begin with), look for gold to surge, but not before China manages to load up at depressed prices.
The source told the 21st Century Business Herald China may gradually increase gold holdings as it is not possible for the country to buy large amounts of the metal within a short time.
China’s gold reserves have reached 1,064 tons, accounting for merely 1.6% of the value of its total foreign exchange reserves. That amount lags far behind the 8,133 tons held by the U.S., and China ranks 85th out of the 101 economies included in a survey conducted by the International Monetary Fund.
Chen Beilei, director of metals and mining at BOC International Holdings, said China may increase its gold reserves to diversify its foreign exchange reserves.
Publicly available data showed the price of gold has risen 14% from the beginning of this year, making the metal a safe bet favored by markets amid uncertainties in the prospects for the global economy.
Demand for gold may continue to rise due to inflationary risks brought by Washington’s recently announced quantitative easing program, high public debts and low economic growth in Europe, Chen said.
Meanwhile, the U.S, dollar has rebounded and gold prices have fallen, which has dampened central banks’ willingness to raise gold reserves.
Feng Rui, president of Silvercorp Metals, said the decline is an adjustment in the upward trend of the price of gold and the metal may rise by as much as 20% in the future.
As to where China may see gold headed in the near future:
Feng predicted the price of gold would peak at $1,600 per ounce in 2011.
BoC International estimated the metal would reach $1,195 per ounce in 2011 and $1,205 per ounce in 2012.