China wants to buy 10,000 tons of gold!

China Should Boost Gold Reserve Holdings, Youth Daily Reports
Nov. 30 (Bloomberg) -- China should increase the amount of gold it holds in
reserves to reduce potential losses from a depreciating dollar, the China
Youth Daily said
today, citing Ji
Xiaonan,
head of the supervisory committee at the state-owned Assets Supervision and
Administration Commission.
“We recommend China increase its gold reserves to 6,000 metric tons within
three-to-five years and possibly to 10,000 tons in eight to 10 years,” the
paper quoted Ji as saying. China increased its gold reserves by 76 percent
to 1,054 tons since 2003, the official Xinhua News Agency reported in April.
China is likely to become the world’s largest producer and consumer of gold
this year, Rozanna
Wozniak,
investment research manager at the World Gold Council, said yesterday. The
dollar has fallen about 20 percent against the euro since Feb. 18. Dubai
World’s possible default may give China an opportunity to invest its foreign
currency reserves in the metal and oil, Ji said in a separate report by the
Economic Information Daily.
“Given the size of their reserves compared with the size of the gold market,
there’s a limit on how much they can add,” David
Barclay,
commodity strategist with Standard Chartered Bank in Hong Kong, said today.
“But it certainly seems that there’s scope for further addition.”
Ji said that the recommendation to buy gold was made by an unidentified
group of experts who had convened since last year to discuss the issue, the
Youth Daily reported.
Record Prices
The nation increased its reserves to 1,054 tons through domestic purchases
and refining scrap metal, Hu
Xiaolian,
head of the State Administration of Foreign Exchange, said in an interview
with the Xinhua News Agency in April.
China may break records for both demand and output this year as jewelry
consumption soars and miners expand production after prices reached all-time
highs, Zhang Yongtao, deputy secretary-general of the China Gold
Association,
said at a conference in Kunming yesterday.
Bullion touched a record $1,195.13 an ounce Nov. 26 as a weaker dollar drove
demand for precious metals as an alternative asset. Gold declined 0.4
percent to $1,172.43 an ounce at 2:23 p.m. in Shanghai.
Some of China’s foreign exchange reserves should be swapped into gold, which
would lessen losses from a depreciating U.S. dollar, the China Youth Daily
said, citing Ji. China is underweight on holdings and will increase buying
as the economy expands, said Jeffrey
Rhodes,
chief executive officer of INTL Commodities DMCC, Oct. 23.
China’s 1,054 tons of gold represent less than two percent of its reserves,
Dubai-based Rhodes said then. That compares with the international average
of 10.2 percent held by central banks worldwide which have under 30,000 tons
of the metal, equivalent to about $960 billion.
The country may not find it “very necessary” to purchase bullion for its
reserves after the price rose above $1,000 an ounce, Zhang Yuyan, an
economist at the Chinese Academy of Social Sciences, said Nov. 5.

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