Post by
KOGA on Nov 10, 2006 8:02am
China May Buy Metal
China May Buy Metal
By Danielle Rossingh and Debarati Roy
Nov. 10 (Bloomberg) -- Gold headed for a fifth consecutive weekly gain on speculation China, the 10th-biggest holder of gold reserves, will buy more of the precious metal to diversify its foreign-exchange reserves.
The dollar fell against the euro after the People's Bank of China Governor Zhou Xiaochuan said the country would keep raising the share of reserves it holds in currencies other than the dollar. Gold, sold in dollars, generally moves in the opposite direction of the dollar.
``There is this trend globally to diversify assets,'' John Meyer, an analyst at Numis Securities in London, said in an interview.
Gold for immediate delivery in London gained as much as $3.49, or 0.6 percent, to $636.90 an ounce, the highest since Sept. 6. It traded 91 cent slower at $632.50 at 11:14 a.m. local time, and is up 0.8 percent this week.
The dollar slid to $1.2875 against the euro in London, from $1.2829 yesterday in New York and $1.2718 a week ago. It fell as far as $1.2901, the weakest since Aug. 21, also on concern central banks will slow purchases of U.S. assets as interest rates rise in Europe and Japan.
``All central banks are trying to diversify,'' People's Bank of China Governor Zhou Xiaochuan told the Reuters news agency at a conference in Frankfurt yesterday. ``We have had a very clear diversification plan for several years.''
China holds about 1.3 percent of its reserves in gold and 72 percent in U.S. assets. China's trade surplus with the U.S. helped drive the country's foreign currency reserves close to $1 trillion.
Platinum Rises
``China will probably be a quiet and consistent taker of gold,'' Dennis Gartman, economist and editor of editor of the Suffolk, Virginia-based Gartman Letter, said at a speech at the RBC Capital Markets gold conference in London yesterday. ``That is the only reason why I will be, have been and continue to be bullish on gold.''
China may increase its gold holdings to ``between 5 and 6 percent in the future,'' Gartman said. The dollar ``will remain the reserve currency of the world, but countries like China and also India may diversify away from the dollar into gold or the euro.''
Among other precious metals for immediate delivery in London, silver gained 1.5 cents to $13.05, palladium fell $3 to $334.50 while platinum climbed $17.50 to $1,222.50.
To contact the reporter on this story: Danielle Rossingh in London at drossingh@bloomberg.net .