China May Increase Gold Holdings in Reserves, Researcher Says

China, owner of the world’s largest foreign exchange reserves, may increase gold holdings to diversify away from the U.S. dollar, a researcher said.

“There’s no reason why the Chinese central bank should hold a disproportionate amount of other countries’ reserve currencies such as the dollar,” David Marsh, chairman of the Official Monetary and Financial Institutions Forum, said today in an interview in Beijing. “It is likely that the Chinese authorities will carry on purchasing gold in modest amounts and they will do it in a way calculated not to disturb the market.”

Gold climbed to a record $1,921.15 an ounce on Sept. 6, 2011 and traded little changed at $1,674.45 an ounce at 8:29 a.m. Beijing time.

“As China aspires to take the lead politically and economically, it is unlikely to be satisfied with storing its wealth simply in liabilities of other countries,” Marsh wrote in a report commissioned by the World Gold Council and published today.

The Chinese yuan, also known as renminbi, is expected to emerge gradually as a new reserve currency along with its growing use in trade and investment, according to the report.

“By the year 2020, the renminbi will be the third-biggest, or one of the three biggest, reserve currencies in the world,” Marsh said in the interview.

To contact Bloomberg News staff for this story: Feiwen Rong in Beijing at frong2@bloomberg.net; Xin Zhou in Beijing at xzhou68@bloomberg.net

To contact the editors responsible for this story: Brett Miller at bmiller30@bloomberg.net; Paul Panckhurst at ppanckhurst@bloomberg.net

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