China should significantly boost the amount of gold <XAU=> held in state reserves, a newspaper run by China’s Ministry of Commerce said on Wednesday, citing a local researcher.
Meng Qingfa, a researcher with China Chamber of International Commerce, was quoted by the International Business Daily as saying that China should eventually boost its gold reserves to a level equal to that held by the United States.
U.S. reserves stood at 8,133 tonnes as of the end of June, significantly higher than China’s current level of 1,054 tonnes.
« Doubtlessly, if the yuan is set to become an international currency like the dollar or the euro, China has to get a huge gold reserve to support it, and a reserve of 1,054 tonnes is far from being enough, » Meng said.
He added that China can keep buying gold at a price of about $1,300 per ounce, and China could build up a gold reserve as large as the United States’ current one by using only 10 percent of its $2.65 trillion stockpile of foreign exchange reserves.
Meng’s view does not represent China’s official stance. But the domestic appeals for China’s foreign exchange reserve regulator to buy bullion has been intensifying in recent years as the dollar has fallen and the gold price has moved higher.
Yi Gang, head of the State Administration of Foreign Exchange, said earlier this year that China will be prudent in adding gold to its official reserves, wary that any move to buy the precious metal would only serve to drive its price higher.
China vies with India to be the world’s top consumer of gold. China is already the top producer, with output of 313.98 tonnes last year, up by almost 50 percent in five years.
According to the World Gold Council, China’s share of global gold demand has doubled from 5 percent in 2002 to 11 percent in 2009, and China’s domestic gold mines could be exhausted within six years.