Last Updated : 01 February 2011 at 16:45 IST
China to raise gold, silver reserves in 2011
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BEIJING (Commodity Online): China is taking several initiatives to raise the country’s reserves in gold and silver in 2011 in an attempt to globalize the Yuan. The main strategy is to buy gold and silver reserves when prices of these precious metals fall.
According to a report published by the Economic Information Daily, the Chinese central bank, the People’s Bank of China, is chalking out plans to buy gold and silver reserves these days considerably as their prices are currently down.
Gold prices have come down by nearly $100 in the last few days. Silver prices that have been also following gold prices in the last one year have fallen thanks to the rise in US dollar value.
China has ambitious plans to make its currency Yuan globally competitive. Several analysts have been predicting that in few years the Chinese Yuan will overtaken the US dollar as the global currency. Recently, global commodities investing legend Jim Rogers said that the Chinese Yuan will eventually dominate the global currency market, overtaking the US dollar.
According to Central bank adviser Xia Bin, China should increase its reserves in gold and silver, said the report from the Economic Information Daily.
“Increasing gold reserve at the time of prices dip is the strategy of internationalizing the Yuan,” the report said.
China, the largest producer of gold, had announced last year that it would considerably step up gold reserves in the next decade to the tune of 10,000 tons. Currently, the Chinese gold reserves stand less than 1200 tons.
Even though there were rumors that the People’s Bank of China—the Chinese central bank—would bid for IMF gold reserves, nothing happened in 2010. Officials said that there will be big gold buying by China in 2010.
Bullion prices climbed around 30% in 2010, gaining for the 10th year, on the back of macroeconomic factors such as European debt crisis, depreciation of US dollar against the major counterparts, strong demand from India due to various festivals and occasion etc.
Investment appeal in precious metals surged last year as a safe haven in order to protect the wealth. China wants to stable its currency, and greater use of its currency for international trade due to reducing reliance on the dollar. All these factors may force to China to increase its gold and silver reserves.
"The report is a positive factor for gold prices in the mid-and-long term, Hwang Il Doo, a senior trader at Seoul- based Korea Exchange Bank Futures Co., said today. Still "it didn't have immediate impact on prices as gold's gain has more to do with the unrest in Egypt at the moment."
China's total gold consumption may increase 15% in the first half, driven by enhancing demand for a safe investments and a hedge against inflation, according to the China Gold Association in Last week.
The Shanghai Gold Exchange said total gold imports by China surged almost five hold in the first 10 months of the last year from the entire amount shipped in 2009. Total shipments were 209 metric tons during that period against with 45 tons in 2009, said exchange Chairman Shen Xiangrong.
Silver is shining in China as the country is all set to maintain the No. 1 status as the top global silver producer and consumer. Silver output from China is going to surge in China for 2011, driven by the boom in the industrial metal from across the world.
According to a new research report from China Research Intelligence (CRI), an important feature of China's silver market is that the domestic price is higher than international market price.
“Domestic price of silver in China is not completely synchronized with the international price and it lags behind with too large fluctuation, resulting in increasing risk of downstream silver consuming enterprises,” said the report.
The CRI report said that China urgently needs to improve the formation mechanism of domestic silver price and seek appropriate trade modes to maintain values and avoid risks. It will be the general trend to introduce silver futures.
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