But there are two other factors may cause China to raise gold prices. Vronsky in Gold-eagle.com points out that 70% of China's $2,273bn foreign reserves is denominated in US dollar.
He points out that "unfortunately, the People's Bank of China did not have the foresight to diversify its mounting foreign reserves into other currencies like the Euro, Yen and gold." At present China has only 1.5% of its foreign reserves in gold while the rest is in US greenbacks which is subjected to vagaries of the market.
Vronsky has also made the following conclusions:
- The world's total existing aboveground gold is only 166,000 tons
- The world's total yearly mine production is only about 2,500 tons