Opportunity Knox

27 April 2009 By John Foley Follow @johnsfoley

Changing US Treasuries into gold would help Beijing undermine the dollar s dominance. But years of mercantilism can t be unwound painlessly. Big Chinese buying would drive the yellow metal s price sky high. The biggest beneficiary of a gold rally? Step forward, Uncle Sam.

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China increased its holdings of gold by over 75% between 2006 and 2009, the head of its foreign reserves agency said on April 24. Hu Xiaolian, head of the State Administration of Foreign Exchange (SAFE), revealed that China had a total of 1054 tonnes of gold.

Central banks held a total of 29,692 tonnes of gold in reserve at the end of March 2009, according to the World Gold Council. In 2008, the market was supplied with 3,468 tonnes of gold from newly mined supply, stock sold by governments and recycled scrap.

Gold was trading at $915 per troy ounce on April 27. At that price, China's holdings were worth $31bn, or 1.6% of its total international reserves. That made China the world's sixth largest holder, after the US, Germany, the International Monetary Fund, France and Italy.

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