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China ended years of speculation about its official gold holdings by revealing an almost 60 per cent jump in its reserves since 2009.
The country’s central bank said its gold reserves were 1,658 tonnes (53.31m troy ounces) as of the end of June. In April 2009, reserves were 1,054 tonnes.
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The purchases show how China is seeking to diversify its reserves away from the US dollar at a time when the price of gold has fallen to near its lowest price since 2010. China has the world’s largest foreign exchange reserves at more than $3tn.
China has now overtaken Russia as the sixth largest holder of gold in the world, after the US, Germany, the International Monetary Fund, Italy and France, according to the World Gold Council. Russia has recently been a buyer of gold, with total gold reserves at almost 1,238 tonnes. The US has gold reserves of 8,133 tonnes
“Based on our analysis on gold’s value and price changes, and on the premise of not creating disturbances in the market, we steadily accumulated gold reserves through a number of international and domestic channels,” the People’s Bank of China said.
At a value of $60.9bn based on today’s prices China’s gold reserves are still a fraction of its US dollar holdings.
The country has been reducing its foreign exchange reserves this year, with $3.69tn at the end of June, down from $3.8tn in January.
Selling foreign exchange reserves has helped maintain the value of the renminbi against the dollar, according to analysts.
China is also actively seeking the IMF’s endorsement of the renminbi as an official reserve currency, a designation that requires a currency to be “freely usable”.
Since 2009, gold rose to a historical peak of $1,921.17 a troy ounce in 2011 before falling sharply to trade at $1142 a troy ounce today.
Central banks hold gold to diversify away from their holdings of currencies. Gold often moves in the opposite direction from the US dollar and is widely seen as a hedge against inflation.
“It shows that they are accumulating gold and why should they stop now,” said Matt Turner, an analyst at Macquarie.
“One assumes the reason is diversification away from the dollar.”
Central banks bought 588 tonnes of gold last year, according to the industry body. China is the world’s largest consumer of gold, followed by India.
