Chinese Increase Gold Bullion Reserve by 454 tonnes on Dollar Concerns

April 26, 2009 by · Leave a Comment
Filed under: Currency News 

This is a structural change in the perception of Gold’s role in the international finance community.  Gold has a track record of providing a safe-haven for wealth in times when governments are taking actions that devalue a countries currency (read: money).  This trend is sure to continue as long as these global policies of quantitative easing continue (read: money printing).  

The biggest threat is if we see a recovery from this massive stimulus is a heavy dose of inflation that changes the perception of the public’s thoughts on inflation.  This can lead an economy down the road to hyper-inflation as the public loses confidence in the currencies’ ability to hold value.

News (Business Wire):

News that China has increased its gold holdings by more than 75% is a clear indication of the critical role that gold plays in central bank reserves, World Gold Council said today.

Welcoming the announcement by China’s State Administration of Foreign Exchange (SAFE) that the country’s official gold reserves have risen from 600 tonnes in 2003 to 1,054 tonnes, the CEO of World Gold Council, Aram Shishmanian, said:

“The Chinese government’s decision further demonstrates the leadership it is increasingly taking and its public recognition of gold’s proven role as a store of value and portfolio diversifier. We are closely monitoring developments at other central banks to determine whether they will follow China’s bold and thought-leading move, particularly those in Asia.

”This news is also further evidence of the growing recognition of gold’s growing prominence in providing stability in the uncertain financial markets, not only as a reserve asset but in the investment markets also.”

As a result of the 454 tonnes bought since the last adjustment in 2003, China’s gold reserves are now the fifth largest among national central banks in the world after the U.S, Germany, France and Italy.

The world’s newest Central Bank, the European Central Bank, initially allocated 15% of its reserve asset portfolio to gold, but this figure has traditionally been much smaller among Asian central banks.

Source: Business Wire

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