* China buys gold to rebalance its reserves
* Gold mining stocks surge 7 pct on China news
* China may buy more, perhaps directly from IMF-analysts
(Recasts, updates with quotes, closing prices, details,
changes dateline from LONDON)
By Frank Tang
NEW YORK, April 24 (Reuters) - Gold scaled a three-week
high on Friday after China said its gold reserves have risen
sharply, raising the prospect of further purchases by Beijing
and other central banks as well as investment funds.
Gold mining stocks, measured by the Gold Bugs index <.HUI>,
jumped 7 percent after China revealed it had secretly raised
its gold reserves by 75 percent since 2003 to 1,054 tonnes,
confirming speculation it had been buying in the market for
some years. []
China's news lifted gold in spite of a rise in U.S. stock
markets. Reassuring economic data suggests the recession may be
abating and that optimism has dampened investor enthusiasm for
gold, a safe haven in times of economic uncertainty.
Spot gold <XAU=> was at $912.10 an ounce at 3:11 p.m. EDT
(1911 GMT), up 1.1 percent from its late Thursday quote of $902
in New York. Earlier on Friday it hit $913.50, a rise of more
than 5 percent this week and the highest price since April 2.
"China is protecting its huge currency risk by diversifying
with gold as well as other currencies like the euro. This is
prudent," said Frank Holmes, chief executive officer of U.S.
Global Investors, which manages more than $2 billion in fund
assets.
Analysts said that China was evaluating its reserve asset
mix in the wake of recent massive liquidity addition by central
banks, which has the potential of debasing world currencies.
"This is an indication that monetary authorities around the
world, not just investors, are also viewing gold in a better
light," said Jeffrey Christian, managing director of CPM
Group.
China's reserves are now the fifth biggest in the world,
with only six countries holding more than 1,000 tonnes.
http://graphics.thomsonreuters.com/apr09/MKT_GLDHLD0409.jpg
But some analysts were wary, and said the Chinese buying
was the equivalent of less than 100 tonnes a year.
"One would expect them to have bought more, actually," said
Jon Nadler, senior analyst at Kitco Bullion Dealers.
U.S. gold futures for June delivery <GCM9> settled up $7.50
at $914.10 an ounce on the COMEX division of New York
Mercantile Exchange.
CHINA'S RESERVE GROWING
China gold reserves now accounts for only about 1.6 percent
of its total foreign exchange holdings and is little more than
one-tenth of the value of the U.S. gold reserve, the world's
biggest. It also means gold has slipped as a share of China's
total reserves from about 2 percent, based on end-2003 prices.
"(It is) not so surprising considering the very rapid
increase in the overall level of Chinese external reserves,
that it probably increased its holdings of all forms of
reserves," John Lipsky, first deputy managing director of the
IMF, said on Friday, when asked whether China would be in the
market to buy 403 tonnes of gold owned by the IMF.
The International Monetary Fund (IMF) last year approved
the sale of 403 tonnes of gold from its stocks of 3,217 tonnes
(103.4 million ounces) as part of a plan to put its finances on
a sounder footing and create an endowment with the proceeds.
Selling IMF gold requires ratification by the legislatures
of member countries, including the U.S. Congress, a process
that is expected to take at least several months.
China's increase in gold reserves and the possibility that
it might buy more of the yellow metal runs against the recent
trend in the market, as 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
Thursday, down 1.53 tonnes, or 0.1 percent, from Wednesday,
extending a decline that began last week in the biggest
unwinding of positions seen since September. []
Silver <XAG=>, tracking gold, rose to $12.93 an ounce, the
highest since April 3 and was last at $12.87 an ounce, up 1.0
percent from its previous finish of $12.74.
Palladium <XPD=> was at $232.00 an ounce, up 0.7 percent
from its previous finish of $230.50 an ounce, and platinum
<XPT=> at $1,174.00 an ounce, down 0.4 percent from its late
Thursday quote of $1,178.50.
(Additional reporting by Pratima Desai, Michael Taylor and
Lesley Wroughton; Editing by Lisa Shumaker)
