China: Gold is not a Major Investment for Us

Speaking at a news conference recently, Yi Gang, the head of China's State Administration of Foreign Exchange (SAFE), stated again that China plans no major move into gold. Of course "major" is a relative thing.

"It is, in fact, impossible for gold to become a major investment channel for China's foreign exchange reserves. I have 1,000 tonnes now, and even if I doubled that holding, according to current prices, that would be about $30 billion," Yi said.

So if I understand Yi, (sorry, I had to do that), he's not saying that they don't want gold or won't buy gold, only that it's impractical to make a "major" move on the scale at which they are operating.  Hmmm.  2.4 trillion?  I can see the problem.

Not exactly a denunciation of gold, is it? On they other hand, why are they encouraging their citizens to buy gold? Is it possible that the Chinese government doesn't want to risk causing (or overpaying due to) spikes in price, but still wants more gold held in China?

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