China loves metals - buying gold to diversify reserves

We are getting a better picture of what China is doing to diversify its currency risk. It is buying hard assets. Earlier this year we have heard that China has been a active stockpiler of copper. In spite of worsening global recession, the price of copper has actually increased. the only reason is that there is demand and that demand is coming form China. Now we find out that China is an active buyer of gold increasing their reserves from 454 metric tons in 2003 to over 1000 tons today. China is now the fifth largest holder of gold in the world. China is the largest producer of gold with production of 288 metric tons or 12.2% of overall output. The Chinese do not have to be active buyers of gold on the open market but it is telling that it is suing more funds to build its portfolio of the "barbarous relic". Another indication that dollars are not the holding thing that China is willing to hold as reserves. 

This just confirms the reports form last year that that PBOC was planning to raise gold reserves by 4000 metric tons as a reserve diversification strategy. This is at the same time that the IMF is trying to reduce their gold reserves through an approval of a sale of 403 tons last year. The IMF wants to sell gold to put itself on better financial footing while China wants to diversify through large gold purchases. One man buys while the other sells.....