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Saturday, August 15, 2015, 12:00

Gold reserves swell as China diversifies forex holdings

By Agencies

Gold reserves swell as China diversifies forex holdings
The Shanghai Gold Exchange is to launch the yuan-denominated gold index this year, predicted to increase China's gold pricing power. (Photo provided to China Daily)

China's current gold reserves have jumped 57 percent from that in 2009, overtaking Russia to become the country with the fifth-largest stash of the metal, according to data released by the central bank.

The world's biggest bullion consumer last month ended six years of mystery over how much gold it is hoarding, revealing that its gold reserves have increased to 53.93 million troy ounces by the end of July from 53.32 million ounces a month earlier.

Bullion remains a large part of many central banks' reserves, decades after they stopped using it to back paper money. Stockpiles of the metal help China to diversify its foreign-exchange holdings as the world's second-largest economy seeks to raise the international profile of its own currency.

"China's central bank will continue to buy," said Gnanasekar Thiagarajan, director of Commtrendz Risk Management Services Ltd in Mumbai.

"The central bank is diversifying its reserves and some amount of bargain hunting has taken place. The PBOC is trying to make the renminbi into an international currency," he said, referring to the People's Bank of China and the country's currency.

The central bank said last month that it boosted bullion assets to 53.32 million ounces by the end of July, or about 1,658 metric tons, up from 1,054 tons in 2009, when it last updated the figures.

The United States has the biggest reserves at 8,133.5 tons, data from the World Gold Council show.

Nations have expanded holdings in the past few years, a reversal from two decades of selling since the late 1980s. Many central banks remain exposed to a small number of key reserve currencies and look to gold as a hedge against volatile currency movements, according to the World Gold Council.

Countries are likely to buy 400 tons to 500 tons of the metal this year, the council said in May. Russia more than tripled its hoard since 2005.

Gold for immediate delivery added 0.2 percent to $1,116.75 an ounce by 3:56 pm in Singapore on Friday.

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