China can crash gold prices and support yuan

China will reassure the growth of gold prices

In brief: China likes gold. Gold prices may begin to decline if China has to get more precious metal.

Gold prices will depend on China. Total gold reserves in China grew by 454 tons and at the end of 2009 amounted to 1,054 tons. According to this index, China ranks fifth in the world ranking. The significance of gold as the currency has declined substantially, although it is not completely removed from the monetary system of the country (the volume of China’s foreign exchange reserves exceeding 2 trillion U.S. dollars, the proportion of gold in them is less than 2%), according to a report on foreign exchange operations of the State foreign exchange control of China.

From 2002 to the end of 2007, total gold reserves of China remained at the same level – about 600 tons. Late last year the volume of gold reserves exceeded 1000 tons, which enabled the country to take fifth place in the world on this indicator. The first four positions are held by the U.S. (8,133.5 tons, the proportion of precious metal in the total gold reserves of the country is 76%), Germany, Italy and France (on average 40%). Earlier versions appeared on the market that China intends to acquire gold the IMF in order to improve the structure of foreign exchange reserves, writes the China International Internet Center. But these versions were not confirmed. In November last year, India bought 200 tons of gold and became the largest buyer of gold the IMF. From that moment began a new round of growth in gold prices. Central banks in many European countries and the United States significantly reduced the volume of gold sales, and increase the volume of its purchases to diversify risks. Amid the financial crisis and a weak U.S. dollar, many developing countries have started to transfer foreign exchange reserves in gold assets. For example, in China in the past five years, growth in demand for gold increased by 13% annually. According to the World Gold Council in the coming decade, demand for gold in China could rise twice. In view of the fact that the capacity of the gold market is limited, China’s proactive in this market will lead to higher prices in the international market.

According to statistics from the World Gold Council, in late 2009, the total gold reserves, including international organizations such as the IMF, reached 30,100 tons, a 17.2% decrease compared to 1976, when it was concluded Jamaica agreement, proclaimed the special drawing right base of the new monetary system, which recorded demonetization of gold and legitimize the regime of floating exchange rates. Last year, the International Monetary Fund has implemented in the market more than 400 tons of gold.

Ukrainian Globalist
2010-06-20 16:30, Commodities.

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