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China Lags U.S. in Gold Holdings, May Raise Total, LBMA Says

China Lags U.S. in Gold Holdings, May Raise Total, LBMA Says
Gold is on course for its 12th annual advance, supported by central-bank buying and record holdings in exchange-traded products as investors seek to preserve their wealth from weakening currencies. Photographer: Guenter Schiffmann/Bloomberg

The Chinese government may add more gold to its reserves as the precious metal accounts for a lower share of total holdings compared with the U.S., according to the London Bullion Market Association.

“When comparing China to the U.S., it would seem that in China, gold asset allocation can only go in one direction,” Chairman David Gornall told the association’s annual conference in Hong Kong. “The country has only 2 percent of its reserves in the form of gold compared with the U.S. at 75 percent.”

Gold is set for a 12th annual gain, supported by central-bank buying and record holdings in exchange-traded products as investors seek to preserve their wealth from falling currencies. The People’s Bank of China hasn’t disclosed any changes to its gold holdings since 2009, when it said they’d risen 76 percent to 1,054 metric tons. While the U.S., Germany, Italy and France keep more than 70 percent of reserves in gold, China’s share is less than 2 percent, according to World Gold Council data.

“Prices have recently been supported by official sector buying,” Gornall said today, without listing any central bank. “Will the gap between the amount of gold held in reserve by the developing markets and that of the developed world close?”

Gold for immediate delivery, which climbed to a record $1,921.15 an ounce on Sept. 6, 2011, traded at $1,734.85 at 5:02 p.m. in Hong Kong after rising 11 percent this year. The run of annual gains, the best performance since at least 1920 in London, has been supported by concern that stimulus programs around the world including that backed by the U.S. Federal Reserve will debase currencies and spur inflation.

Bank Buyers

Brazil, South Korea and Russia are among countries that added gold this year, data from the International Monetary Fund show. Nations bought 254.2 tons in the first half and may add close to 500 tons this year, the World Gold Council said in August, exceeding the 456 tons added in 2011. China has the world’s largest foreign-exchange reserves, totaling $3.29 trillion in September, according to data tracked by Bloomberg.

“Emerging-market economies from the G-20 countries are looking to elevate their gold holdings,” Ashish Bhatia, manager of government affairs at the producer-funded WGC, said in an interview in Hong Kong yesterday. There’s “renewed interest from central banks on the demand side.”

U.S. holdings, the world’s largest, totaled 8,133.5 tons, or 76.6 percent of reserves, according to WGC data for this month. Germany, the second-biggest holder, had 3,395.5 tons, representing 73.9 percent of reserves, it said. China’s gold represented 1.8 percent of its total reserves, the figures show.

‘Number One’

“China has, of course, been the world’s number one gold-mining country for the past five years,” said Gornall, head of metals trading at Natixis SA. “What is remarkable is the way that this growth has continued while many of the other important mining countries have struggled to maintain production.”

The Fed said on Oct. 24 it will maintain $40 billion in monthly purchases of mortgage debt and probably hold interest rates near zero until 2015 to spur growth and reduce joblessness. The Bank of Japan expanded an asset-purchase program on Oct. 30 for the second time in two months and the European Central Bank has said that it is ready to buy bonds of indebted nations.

The LBMA is a London-based trade group that represents the wholesale market for gold and silver.

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