* China buys gold to rebalance its reserves
* China may buy more, perhaps directly from the IMF
* SPDR holdings fall
(Recasts, adds comment/detail, changes dateline from TOKYO)
By Pratima Desai
LONDON, April 24 (Reuters) - Gold surged to a three-week
high on Friday, boosted by the prospect of further purchases by
China, after the country revealed it had been buying the
precious metal since 2003.
Spot gold <XAU=> was bid at $909.75 an ounce at 0918 GMT
from $902 late in New York on Thursday. Earlier on Friday it hit
$912.80, a rise of more than 5 percent this week and the highest
since April 2.
China has raised its gold reserves by three-quarters since
2003 to 1,054 tonnes, confirming speculation that it had been
buying in the market for some years. []
"The massive accumulation of foreign exchange reserves meant
gold as a proportion of total reserves had fallen below 1
percent compared with a norm of about 2 percent," said Michael
Lewis, head of commodities research at Deutsche Bank.
"It could be a short term supportive story because they want
to get back to where they were with quite a substantial amount
of purchasing for their reserves."
China's reserves are now the fifth biggest in the world,
with only six countries holding more than 1,000 tonnes.
It needs to buy more and some of its purchases could be in
the spot market, but UBS thinks there is another way for the
country China to quickly boost its gold holdings
"The proposed IMF sales of 403.3 tonnes of gold represents
the biggest opportunity for China to buy a large amount of gold
in one transaction," it said.
"China could buy gold in the open market and add to its
holdings, although it would only be able to do so at a slow and
steady rate: any move to buy large amounts of gold would have a
large market impact."
China's news overshadowed a rise in equity markets, which in
recent weeks has dampened investor enthusiasm for gold, seen in
the holdings by the world's largest gold-backed exchange-traded
fund, the SPDR Gold Trust <XAUEXT-NYS-TT>.
SPDR's gold holdings fell to 1,104.45 tonnes as of April 23,
down 1.53 tonnes or 0.1 percent from the previous day, extending
a decline that began last week in the biggest unwinding of
positions seen since September. []
A 44 percent surge in SPDR's holdings since the start of the
year had helped underpin gold prices, but the last increase was
nearly a month ago.
However traders say renewed dollar weakness will also help
sentiment in the gold and precious metals markets. []
Silver <XAG=>, tracking gold, rose to $12.99 an ounce, the
highest since April 15 and was last bid at $12.75, up from
$12.74 late in New York on Thursday.
Palladium <XPD=> was bid at $233 from $230.50 and platinum
<XPT=> at $1,177 from $1,178.50 on Thursday.
Prices of platinum used in autocatalysts have staged a
recovery in recent days on talk of buying by car makers, glass
makers and investment demand. But expectations are the rally
will be limited and likely to reverse.
"The gains are premature, there is no end in sight to the
carnage in the auto sector, no amount of incentives are going to
significantly increase demand for new cars in this environment,"
a London-based trader said.
Latest news came from the UK, where data showed car output
in March fell 51.3 percent from a year ago. []
(Reporting by Pratima Desai; editing by Peter Blackburn)
