1 May 2009
China has reported that it has been secretly increasing its gold reserves. It has almost doubled the amount of gold that it holds, to more than a thousand tons. The move raises questions about China's attitude to the US dollar.
Click to hear the report:
China has the biggest foreign exchange reserves in the world, totalling almost $2,000 billion dollars. About two-thirds of this is estimated to be in US dollars.
But China has been backing away from the dollar for a while; three years ago Beijing broke the peg that linked its currency, the renminbi, and the dollar. Then, just before the London G20 summit earlier this month, China suggested that the time might have come for countries to reduce their reliance on the US dollar as a reserve currency. Nonetheless about two-thirds of China's foreign exchange reserves is estimated still to be in dollars.
But the Chinese move has given a small boost to the gold price, up $5.50 at $913 an ounce in London, and a big boost to those traditional investors who still believe that gold is the safest store of value. However bullion market experts say China's gold holdings are still far smaller than those of the US and other developed countries, and it was still buying US dollars.
Rodney Smith, BBC
Click to hear the vocabulary:
- foreign exchange reserves
- money in freely convertible currencies that are kept safe and are only supposed to be used in extraordinary situations
- backing away from
- here, trying to stop being dependent on
- for a while
- for quite a long period of time
- broke the peg that linked
- stopped linking (i.e. the Chinese currency's rate stopped being fixed against the US dollar)
- reliance on
- being dependent on
- given a small boost to the gold price
- made the price of gold go up slightly
- a big boost
- here, greatly increased confidence
- store of value
- here, type of investment, way of holding on to your money and possibly even making profit
- bullion market experts
- those specialising in buying and selling bars of gold or silver