China Considers Raising Gold Reserves - Business China

November 17, 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.

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.

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.

Gold has gained 22% this year, reaching a record $1,424.60 on Nov. 9.