China buying boosts gold to 3-week high

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April 24, 2009 9:49am NYSE:GLD

chinagoldYou may note our story on April 16th where we showed the largest holders of gold in the world, and SPDR Gold Trust (GLD). At that time GLD was the sixth largest holder of gold in the world trumping Switzerland, Japan, The Netherlands, and China in that order. This is a huge swing by China to increase their overall gold holding  from the 10th to 5th position worldwide.

LONDON, April 24 (Reuters) – Gold surged to a three-week high on Friday, boosted by the prospect of further purchases by China, after the country revealed it had been buying the precious metal since 2003.

Spot gold was bid at $908.10 an ounce at 1325 GMT from $902 late in New York on Thursday. Earlier on Friday it hit $912.80, a rise of more than 5 percent this week and the highest since April 2.

China has raised its gold reserves by three-quarters since 2003 to 1,054 tonnes, confirming speculation that it had been buying in the market for some years.

“The massive accumulation of foreign exchange reserves meant gold as a proportion of total reserves had fallen below 1 percent compared with a norm of about 2 percent,” said Michael Lewis, head of commodities research at Deutsche Bank ( DB – news – people ).

“It could be a short term supportive story because they want to get back to where they were with quite a substantial amount of purchasing for their reserves.”

China’s reserves are now the fifth biggest in the world, with only six countries holding more than 1,000 tonnes.

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