China becomes world's biggest gold buyer in 2009

15:23, December 29, 2009      

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World Gold Council (WGC) data reveals that for the first time in 21 years the world's central banks have been net buyers of gold and China has been the biggest buyer this year, adding 454 tones to bring its central bank reserves to 1,054 tones.

Amid growing concern over the weakness of the dollar, about 28 billion U.S. dollars worth of bullion was bought by central banks this year, based on an average price of 978 U.S. dollars an ounce, according to the WGC.

The biggest buyers have been the emerging economies of China, Russia and India, but smaller countries such as the Philippines, Kazakhstan, Sri Lanka and Mexico have also been shifting their reserves into gold.

The value of the dollar, the default reserve currency for most countries, has fallen as investors have grown cautious about America's huge debt burden and possible inflationary trends.

Meanwhile, a handful of developed countries have taken advantage of record gold prices to reduce the size of their vaults. The metal hit a peak of more than 1,200 U.S. dollars an ounce this year, according to Goldman Sachs.

However, Dylan Grice, an analyst at Société Générale, believes that the continued weakness of the dollar, concern about inflation and fiscal policy will continue to drive the gold price.

A spate of gold-buying in the 1960s, led by France, resulted in the collapse of the Bretton-Woods system in 1971 when the link between the value of the dollar and gold was abolished.

By People's Daily Online
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