China quietly builds gold reserve

By Rodney Smith
Business reporter, BBC World Service

Demand from China has pushed up the price of gold.

China has reported that it has been secretly increasing its gold reserves.

It was able to keep it secret by buying domestically produced metal, almost doubling the amount of gold it holds to more than 1,000 tons.

China has the biggest foreign exchange reserves in the world, totalling almost $2,000bn (£1.373bn).

An estimated two thirds is held in US dollars, though China has been backing away from the dollar as a reserve currency for a while.

Safe investment?

Three years ago Beijing broke the peg that linked its currency, the renminbi, and the dollar.

Then, just before the London G20 summit earlier this month, China suggested that the time might have come for countries to reduce their reliance on the US dollar as a reserve currency.

The Chinese move has given a small boost to the gold price, up $5.50 (£3.77) at $913 an ounce in London and a big boost to those traditional investors who believe that gold is still the safest store of value.

However, bullion market experts say China's gold holdings are still far smaller than those of the US and other developed countries, and it was still buying US dollars.