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China to mull long-term benefits before investing in gold
(China Daily/Agencies)
Updated: 2009-12-04 08:05
China's central bank views gold prices as very high and will be wary of "bubble" assets, the Apple Daily reported yesterday, citing Hu Xiaolian, a deputy governor at the People's Bank of China.
The long-term benefits must be considered when managing the overall configuration of foreign-exchange reserves, the Hong Kong paper quoted Hu in Taipei as saying in response to a question about whether China's central bank would buy gold. A bank spokesman declined to comment on the report when contacted by Bloomberg News.
Gold advanced to a record for a third day, reaching $1,226.33 an ounce, as investors sought protection against the prospect of currency debasement and inflation. China increased its gold reserves by 76 percent to 1,054 tons since 2003, Xinhua News Agency reported in April.
"It comes as a big surprise to me seeing central banks treating gold as a safe haven asset," Stewart Murray, chief executive of the London Bullion Market Association, said at a conference in Shanghai. Still, "as for China, well, it clearly needs to buy some gold".
China, the world's largest producer of gold, has an "extremely low" percentage of bullion in its reserves, implying that it may need to buy just to maintain a constant proportion, Rozanna Wozniak, investment research manager at the World Gold Council, said on Nov 29.
The outlook for gold sparked a debate between economist Nouriel Roubini and Jim Rogers last month. Rogers, the investor who predicted the start of the commodities rally in 1999, said Roubini is wrong about the threat of bubbles in gold and emerging-market stocks. Roubini, who predicted the global economic crisis, said a forecast by the investor that gold will double to at least $2,000 an ounce is "utter nonsense".
Bullion has found support from International Monetary Fund sales to central banks. Since the end of September, India, Mauritius and Sri Lanka bought more than half of the 403.3 tons of gold that the International Monetary Fund plans to sell to bolster its balance sheet and boost lending to low-income nations.
China's gold holdings represent less than 2 percent of its reserves, Jeffrey Rhodes, chief executive officer of INTL Commodities DMCC, said on Oct 23. That compares with the international average of 10.2 percent held by central banks worldwide. China has the world's largest foreign-exchange reserves of $2.3 trillion.
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China should increase the amount of gold it holds in reserves to reduce potential losses from a depreciating dollar, China Youth Daily said on Nov 30, 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 tons within three to five years and possibly to 10,000 tons in eight to 10 years," the paper quoted Ji as saying.
