BEIJING (Commodity Online): America’s worst fears are coming true now. China’s is hugely converting its foreign reserves into gold. This fear was there for quite some time for the US as it realized the value of dollar was hit badly during the recession.

Realising that the financial meltdown has badly dented the dollar, China is on a spree to increase its Gold reserves. This has resulted in China becoming the fifth country in the world as far as gold reserve is concerned.

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Now, China’s gold reserve has crossed 1,054 tonne mark. China is the largest Gold producer in the world, with a more than 300 tonnes of gold produced annually. China is also the world’s second largest gold consumer, with a consumption of over 400 tonnes a year, second only to India, which consumes around 800 tonne gold every year.

However, gold is unlikely to become a primary investment for China’s foreign exchange reserve.

Apart from the precious metal’s unsound yield, China fears that since the world gold market is limited, large purchases by China will inevitably push up the international price further dampening any hopes of a good return.

Besides, privately owned gold stocks in China have reached nearly 3,000 tonnes, tripling that of the 1,054-tonne national treasury reserves.

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