China Said to Consider Buying Gold From IMF, Market News Says

BEIJING, Sept. 22 -- China may purchase some of the 403.3 metric tons of gold being offered by the International Monetary Fund, Market News International reported, citing two unidentified government sources.

    China will consider the purchase to diversify its reserves if the price is right and the potential return relatively high, the report said, citing one of the sources. There is no indication China is seeking to buy all of the gold on offer, the report said, citing no one.

    The IMF board approved the sales, valued at about $13 billion, pledging to avoid disrupting the market with the transactions and saying it would "stand ready to sell gold directly to central banks," according to a statement Sept. 18. An official at the People's Bank of China declined to comment.

    "It's very possible that China buys from the IMF and it's also possible the country buys all of it given its vast forex reserves and relatively low gold holdings," Qu Mingyi, a gold dealer at the Bank of China Ltd., said from Shanghai. Buying by central banks would reduce the impact of the IMF sale on the market, Qu added.

    China, the world's biggest gold producer, has increased reserves by 76 percent to 1,054 tons since 2003 and has the fifth-biggest holdings by country, Hu Xiaolian, head of the State Administration of Foreign Exchange, said in April. China's foreign reserves, the world's largest, rose 9.1 percent in the second quarter, climbing a record $178 billion, and totaled $2.13 trillion on June 30, according to the central bank.

    Sales Any Time

    The bullion sales can occur any time, the IMF said. Selling directly to central banks, which have not yet expressed interest, would be faster, according to the IMF.

    Bullion for immediate delivery declined as much as 1.2 percent in Singapore to a low of $995.97 an ounce, the first day it traded below $1,000 since Sept. 15. It was priced at $999.30 an ounce at 5:30 p.m. in Singapore.

    China may double the ratio of its gold holdings to its foreign-currency reserves over five years, Sun Zhaoxue, chairman of the China Gold Association, said May 15. The association "hopes" China will increase gold holdings to 3 percent of foreign currency reserves in five years from 1.4 percent now, Sun said.

    "I would say China or some of the other Asian central banks would be interested" in buying the IMF gold, Mark Pervan, senior commodity strategist with ANZ Banking Group Ltd., said today. "It's a fairly large amount. A lot of these central bank transactions tend to be movement between the banks."

    The matter will be raised by the Chinese delegation during the G20 meeting this week, the Market News report said.

    (Source: Bloomberg)