China's been building its gold reserves - now over 1,000 tonnes

A Chinese official has confirmed the belief that the country has been quietly building up its gold reserves. It is now the world's fifth biggest holder of gold with more than 1,000 tonnes held.

BEIJING (Reuters) - 

China revealed on Friday that it had quietly raised its gold reserves by nearly three-quarters since 2003, increasing its holdings to 1,054 tonnes and confirming years of speculation it had been buying.

Hu Xiaolian, head of the State Administration of Foreign Exchange (SAFE), told Xinhua news agency in an interview that the country's reserves had risen by 454 tonnes from 600 tonnes since 2003, when China last adjusted its state gold reserves figure.

The world gold market has been buzzing with talk about China buying gold for years as the country's foreign exchange reserves have rocketed, and speculation has picked up since the global economic crisis threatened to weaken the value of those reserves.

Gold prices jumped on the news and were up 1 percent on the day at $910.80 an ounce at 0540 GMT.

China recently reported the change in its gold holdings to the International Monetary Fund and would include the latest change in central bank reports and balance of payment statistics, Hu said.

China's reserves were now the fifth biggest in the world, with only six countries holding more than 1,000 tonnes, she said.

China had increased its stocks by buying on the domestic market and from domestic producers.

Gold market participants said Hu's revelation was good news for the market and signalled likely further buying.

"The comments indicate that China will buy more gold as reserve to improve its foreign reserve portfolio. This is a trend," said Yao Haiqiao, president of Longgold Asset Management.

Hou Huimin, vice general secretary of the China Gold Association, said China should build its reserves to 5,000 tonnes.

"It's not a matter of a few hundred, or 1,000 tonnes. China should hold more because of its new international status, and because of the financial crisis," he said.

"The financial crisis means the U.S. dollar value is changing fast, and it may retreat from being the international reserve currency. If that happens, whoever holds gold will be at an advantage."

The European Central Bank recommends its member banks hold 15 percent of their reserves in gold, but among Asian nations the percentage is far smaller, said Albert Cheng, World Gold Council managing director for the far east.

(Additional reporting by Chris Buckley in Beijing, Polly Yam in Hong Kong, Nick Trevethan in Singapore and Chikako Mogi in Tokyo; Editing by Nick Macfie)

(Reporting by Chris Buckley; Editing by Tom Miles and Ken Wills)

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