China’s gold reserves increased 76 percent from 600 tons in 2003 to 1,054 tons, to become the world’s fifth largest gold reserves as of the end of last year, ranking higher by five notches from 2003, according to data released by the State Administration of Foreign Exchange (SAFE).
China has told the International Monetary Fund of the recent increase in gold reserve and changes will be reflected in the central bank’s balance sheet and statistical reports, according to SAFE.
The U.S. has the biggest gold reserve with 8,133 tons, followed by Germany (3,412tons), France (2,508 tons) and Italy (2,451 tons).
SAFE Director Hu Xiaodong said during a recent interview that China was gradually increasing its gold reserve by purifying domestic gold and purchasing on the domestic market.
The People’s Bank of China (PBoC), China’s central bank, has bought gold on the domestic market with RMB instead of on the world market with its foreign exchange reserve for fear of greatly influencing the international gold price, increasing China’s costs in gold purchasing, and setting itself up for wide criticism from the international financial market.
Still the price of gold started to increase on news that China’s gold reserves soared and the nation would buy more. Gold prices increased 5.3 percent last week alone.
Some see China’s huge purchases of gold as a strategy to lessen its dependency on the U.S. dollar and eventually to make the yuan the key currency.
A People’s Bank of China senior official close to the policy-making circle recently suggested that China should define a long-term plan to constantly and secretly increase its gold holdings, claiming that at present the percentage of gold in China’s total reserve was too low. China’s holdings of 1054 ton of gold make up about 1% of its total forex reserves. The suggestion was for PBoC to buy as much gold as possible from China’s annual gold output of almost 300 tons, while the gold needed by industries and residents could be imported. He also suggests the government buy in gold continuously within a preset price range.
China is beginning to increase its gold reserve as its long-term strategy, not only as an important tool to hedge the USD risk, but also to bolster RMB’s globalization with its increased gold reserve.
Source : Konaxis
