TAIPEI — Reuters Published on Wednesday, Dec. 02, 2009 6:51AM EST Last updated on Wednesday, Dec. 02, 2009 7:06AM EST

Gold (GC-FT1,211.7011.500.96%) prices are currently high and markets should be careful of a potential asset bubble forming, a senior official at China's central bank said on Wednesday, as prices for the precious metal hit a record high.

“We must keep in mind the long-term effects when considering what to use as our reserves,” Hu Xiaolian, a vice-governor at the People's Bank of China, told reporters in Taipei, when asked if China had plans to increase its gold holding in its foreign exchange reserves.

“We must watch out for bubbles forming on certain assets, and be careful in those areas.”

Gold hit record highs at $1,216.75 (U.S.) an ounce in Europe on Wednesday as investors bet on higher prices.

China's more than $2-trillion in foreign exchange reserves are mostly parked in U.S. treasuries, despite calls from some in China to invest the reserves in oil and other natural resources that the fast-growing Chinese economy will need in future.

Before gold prices hit record highs, however, China said last month that it is working to improve the allocation of assets in its foreign exchange reserves, when asked whether it would buy any of the gold that the International Monetary Fund is seeking to sell.