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Published On: Tue, Sep 16th, 2014

China may join countries boosting their gold reserves in an environment of huge holdings imbalances

China may become the next country to boost its gold reserves, having only modest amounts compared to developed economies’ holdings.

China may become one more country to boost its gold reserves, having modest amounts compared to developed economies’ holdings.

China may become yet another emerging economy to increase its gold reserves. The precious metal constitutes a tiny part of China’s foreign-exchange holdings, much smaller compared to those of developed economies. There have been no changes to the country’s gold reserves since 2009, when authorities announced the holdings were 1,054.1 metric tons. China is the country with the heftiest foreign-exchange reserves globally, and bullion makes up 1.1 percent of the total; in comparison, the US and Germany have an impressive 70 percent, being the largest gold holders worldwide, according to World Gold Council data.

Clearly, in the course of time western central banks are going to shrink their reserves; for China and other Asian countries those reserves will be going up. According to analysts, in the next three decades, gold is projected to become more traded between central banks, given the huge imbalances among the world’s gold holdings, taken as a percentage of the overall asset reserves.

Central banks have been net gold purchasers for 14 successive quarters, and last year they helped to restrict bullion brutal slide: the precious metal’s losses were the largest since 1981, and may lead to purchases hiking to reach 500 tons this year, following the 409 tons last year.

Bullion for immediate delivery rose slightly, to $1,237.04, or with 0.3 percent, by 10:44 am Beijing’s time. Last year it slumped by 28 percent, which was the heaviest annual decline in over three decades; now it is 36 percent down, from the September 6, 2011 record of $1,921.17.

Russia is on this year’s list of nations that have added gold to their reserves, thus boosting holdings to reach the highest in the last two decades at least. Russia’s hoard has surpassed China’s, now being the fifth-largest by country, as council data indicate.

China has the second biggest economy worldwide. Its foreign-exchange reserves have increased nearly twofoldsince April 2009, reaching $3.99 trillion. That date was the last announcement of changes to bullion holdings. China is also the largest bullion producer. Last year it managed to overtake India as the largest gold user, as price declines urged purchases.

The US gold reserves amount to 8,133.5 tons. Germany has 3,384.2 tons, Italy 2,451.8 tons. Russia holds 1,105.3 tons, which constitute 9.8 percent of the country’s total holdings.

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