How Far Can China Push Up Gold Prices?

Source:

". . .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"

China has now become a decisive factor not only in industrial metals but also precious metals. China's gold consumption rose 13.5% in 2009, and is now been estimated at 450 tons, according to latest available data.

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
China's gold deficit represents 27% of the total existing aboveground gold (166,000). Furthermore, if China were to buy up all newly mined gold in the world, it would take 18 years to accumulate 44,619 tons.

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