China Behind U.S. in Total Gold Holdings, LMBA

Gold accounts for a lower share of total holdings in China as compared with the U.S., which may account for the Chinese government deciding to add more gold to its reserves, according to the London Bullion Market Association.

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

Central bank buying and record holdings in exchange-traded products have contributed to a 12th annual gain in the gold market as investors seek to preserve wealth in a troubled market with falling currencies, according to Bloomberg.

The People’s Bank of China has not disclosed any changes to its gold holdings since 2009 when it disclosed a change of 76 percent to 1,054 metric tons. The U.S., Germany, Italy, and France keep more than 70 percent of reserves in gold, but China’s share of reserves in gold accounts for less than 2 percent, according to the World Gold Council’s data.

Gornal continued by saying prices have recently been supported by official sector buying, though he did not list any central bank. He wonders whether the gap between the amount of gold held in reserve by the developing markets and that of the developed world will close.

Gold gained 0.32 percent to $1,736.50 per troy ounce by mid-morning Monday, hovering around a three-week high at $1,738 per troy ounce achieved on Friday and significantly higher than the two-month low around $1,672 from last week. U.S. gold futures for December delivery gained 0.34 percent to $1,736.70 per troy ounce.

Brazil, South Korea, and Russia are among countries adding to their gold reserves this year, according to data released by the International Monetary Fund. Nations purchased 254.2 tons in the first half and may add close to 500 tons this year, per a projection by the World Gold Council in August, which would be in excess of the 456 tons added in 2011.

Ashish Bhatia, manager of government affairs at the producer-funded World Gold Council said emerging markets from the G-20 countries are looking to elevate their gold holdings. Bhatia also said there’s a renewed interest from central banks on the demand side.

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