Dear CIGAs,

Where there is smoke, there is always fire – rumors of Chinese gold buying have now been proven to have been correct. If anyone wants to know one of the main buyers on any price setbacks in gold, look no further than the emerging global financial power…

Talk of IMF gold sales should receive a dose of reality based upon this revelation from the Chinese monetary authorities. They have indeed been quietly diversifying and accumulating gold and would no doubt welcome any large sales by the IMF, should that even occur at all.

Trader Dan

REUTERS UPDATE 2-China reveals it has 1,054 tonnes of gold –Xinhua
By Alfred Cang and Lucy Hornby

SHANGHAI/BEIJING, April 24 (Reuters) - China revealed on Friday that it had quietly raised its gold reserves by three-quarters since 2003, increasing its holdings to 1,054 tonnes and confirming years of speculation it had been buying.

Hu Xiaolian, head of the State Administration of Foreign Exchange (SAFE), told Xinhua news agency in an interview that the country’s reserves had risen by 454 tonnes from 600 tonnes since 2003, when China last adjusted its state gold reserves figure.

The world gold market has been buzzing with talk about China buying gold for years as the country’s foreign exchange reserves have rocketed, and speculation has picked up since the global economic crisis threatened to weaken the value of those reserves.

Gold prices <XAU=> jumped on the news and were up 1 percent on the day at $910.80 an ounce at 0540 GMT. By a Reuters calculation, China’s holding of gold would be worth $30.9 billion at current prices.

China recently reported the change in its gold holdings to the International Monetary Fund and would include the latest change in central bank reports and balance of payment statistics, Hu said.

China’s reserves were now the fifth biggest in the world, with only six countries holding more than 1,000 tonnes, she said.

China had increased its stocks by buying on the domestic market and from domestic producers.

Gold market participants said Hu’s revelation was good news for the market and signalled likely further buying.

"The comments indicate that China will buy more gold as reserve to improve its foreign reserve portfolio. This is a trend," said Yao Haiqiao, president of Longgold Asset Management.

Hou Huimin, vice general secretary of the China Gold Association, said China should build its reserves to 5,000 tonnes.

"It’s not a matter of a few hundred, or 1,000 tonnes. China should hold more because of its new international status, and because of the financial crisis," he said.

"The financial crisis means the U.S. dollar value is changing fast, and it may retreat from being the international reserve currency. If that happens, whoever holds gold will be at an advantage."

The European Central Bank recommends its member banks hold 15 percent of their reserves in gold, but among Asian nations the percentage is far smaller, said Albert Cheng, World Gold Council managing director for the far east.

(Additional reporting by Chris Buckley in Beijing, Polly Yam in Hong Kong, Nick Trevethan in Singapore and Chikako Mogi in Tokyo; Editing by Tom Miles and Nick Macfie)
((tom.miles@reuters.com; +86 10 6627-1200; Reuters Messaging: tom.miles.reuters.com@reuters.net))
((If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com))

China Increases Gold Reserves 76% to Fifth-Largest (Update4)
By Eugene Tang and Bob Chen

April 24 (Bloomberg) — China boosted its gold reserves by 76 percent since 2003 and has the world’s fifth-biggest holding by country, said Hu Xiaolian, head of the State Administration of Foreign Exchange.

The nation increased its reserves by 454 tons to 1,054 tons through domestic purchases and refining scrap metal, Hu said in an interview with the Xinhua News Agency today. The amount is more than Switzerland’s 1,040 tons, World Gold Council data show, and is worth $31 billion at current prices.

China has the world’s largest foreign exchange reserves at $1.95 trillion as of March 31, according to state administration data. The holdings have climbed about sixfold in the past six years as the country had record trade surpluses and inflows of foreign investment. Gold prices have almost tripled to more than $900 an ounce from $337.

“Chinese foreign-exchange reserves have absolutely exploded in the past few years,” said Jan Lambregts, head of Asia research at Rabobank International in Hong Kong. “We shouldn’t be surprised that they’re adding a lot of all asset classes. I don’t think they’re shifting away from U.S. dollars into gold.”

Gold climbed to a record $1,032.70 an ounce on March 17 last year and traded 0.9 percent higher today at $912.08 an ounce at 3:18 p.m. local time in Singapore.

More…

China admits to building up stockpile of gold
Alfred Cang and Tom Miles, Reuters
Published: Friday, April 24, 2009

SHANGHAI/BEIJING - China revealed on Friday that it had secretly raised its gold reserves by three-quarters since 2003, increasing its holdings to 1,054 tonnes - or a pot worth about US$30.9-billion - and confirming years of speculation it had been buying.

Hu Xiaolian, head of the State Administration of Foreign Exchange, told Xinhua news agency in an interview that the country’s reserves had risen by 454 tonnes from 600 tonnes since 2003, when China last adjusted its state gold reserves figure.

The confirmation of its surreptitious stockpiling is likely to fuel market talk about Beijing’s ability to buy secretly and its ambitions for spending its nearly US$2-trillion pile of savings. And not just in gold: copper and other metals markets are booming thanks to China’s barely-visible hand.

Speculation has gathered speed over the last year, since the tumbling dollar has threatened to weaken China’s buying power - and give it yet more reason to diversify into gold, oil and metals.

Gold prices jumped on the news of Chinese buying and were up more than 1% on the day at US$912.05 an ounce at 0715 GMT. By a Reuters calculation, China’s holding of gold would be worth around US$30.9-billion at current prices.