Gold price hits $1,118 as China adds to its official gold reserves again

Posted on 14 August 2015 with 1 comment from readers

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The gold price jumped to $1,118 on news that China, the world’s biggest bullion consumer, has disclosed a 1.1 per cent increase in its gold reserves in July to 54 million ounces, according to data released on Friday by the central bank.

On July 17th the country ended six years of mystery surrounding its hoard, revealing a 57 per cent jump in assets since 2009 and overtaking Russia to become the country with the fifth-largest stash. However, this is still widely believed to be an understatement of the true gold reserves held by China.

Reserve status

The IMF said earlier this month that more work was needed on data transparency before deciding whether to grant the yuan reserve status. China devalued the currency this week and announced a shift to a more market-driven exchange rate mechanism.

Bullion remains a large part of many central banks’ reserves, decades after they stopped using it to back paper money. Stockpiles of the metal help China to diversify its foreign-exchange holdings as the world’s second-largest economy seeks to raise the international profile of its own currency.

The central bank said on July 17th that it had boosted bullion assets to 1,658 tonnes, up from 1,054 tonnes in 2009, when it last updated the figures. The US has the biggest reserves at 8,133 tonnes.

Golden hedge

Many central banks remain exposed to a small number of key reserve currencies and look to gold as a hedge against volatile currency movements, according to the World Gold Council.

Countries will probably buy 400 tons to 500 tons of the metal this year, the council said in May. Russia more than tripled its hoard since 2005 and Kazakhstan has raised its holdings every month since October 2012.