March 9, 2010 – Although many have speculated about China’s gold bullion reserves, recent comments by Yi Gang, director of China’s State Administration of Foreign Exchange have not led to any substantial changes in gold prices. While it has 1,054 tonnes of gold in its treasury, China does not see itself as a large player in the gold market, despite a desire to diversify its $2.4 trillion in currency holdings.
“It is, in fact, impossible for gold to become a major investment channel for China’s foreign exchange reserves. I have 1,000 tonnes now, and even if I doubled that holding, according to current prices, that would be about $30 billion,” Yi said.
China had been rumored to have interest in purchasing the remaining 191.3 tonnes of gold belonging to the International Monetary Fund. “I don’t think China will buy gold in the open market. They will buy gold from their own mines,” said a dealer in Hong Kong.
At 2:30 PM EST today, Gold bullion prices had dropped $1.50 to stand at $1,123.20 per ounce. The lower prices were believed to be the result of unwinding speculative bets related to Greece’s debt rather than reaction to Yi’s comments.
While China’s decision has not caused increased prices or interest in gold investment, demand continues to be steady. Gold bullion investment rose nearly seven percent last year and SPDR Gold Trust has recently pushed its holdings up 0.6 percent as investor interest climbs.
