Is even Resource Investor capitulating on the gold manipulation question?

Section:

From Xinhua News Agency
Monday, December 26, 2005

http://news.xinhuanet.com/english/2005-12/26/content_3971982.htm

SHENZHEN, China -- To buy or not buy? That's a
question for Chinese foreign exchange authorities.
They have been urged to expand gold reserve since the
Renminbi appreciation, but the decision is hard to
make since the gold prices are rocketing.

Some economists have been appealing to the State
Administration of Foreign Exchange to expand China's
gold reserve after the Renminbi appreciation in a bid
to reduce the country's reliance on the greenback.

But others believe it's not a proper time to buy gold
at such high prices.

The State Administration of Foreign Exchange did not
let out their voice, but folk economists have been
prompting them to take actions.

China should increase its gold reserve from 600 tons
to about 2,500 tons in a short term and to 3,000 tons
in a long term to cope with the versatile exchange
rate risks, said Teng Tai, an economist of China
Galaxy Securities Company.

Too little gold reserve would pose threat not only to
China, but also to the global monetary system, Teng
said.

China should increase gold reserve to reduce the
foreign exchanges risks and diversify its state
reserve with various goods, like gold and oil, in the
long run, said Shen Xiangrong, director of the
Shanghai Gold Exchange, China's sole gold market.

The appeal is closely related with China's exchange
rate reform on July 21 this year. The Renminbi had
been pegged to U.S. dollars in the past few years
before the reform. Quite a big proportion ofChina's
foreign exchange reserves are bond assets denominated
in the greenback. The assets will face depreciation
after the Renminbi appreciation.

Global investors could benefit from buying Renminbi,
but not Chinese investors and what they could buy is
only gold, Teng said.

China reported about 600 tons of gold reserve at the
end of June 2005, about 1.4 percent of the total
foreign exchange reserve, according to figures from
the International Monetary Fund (IMF).

The proportion is much lower in comparison with many
other countries.

According to World Gold Council, many countries and
organizations report more than 1,000 tons of gold
reserve, including the United States, Germany, France,
Italy, Switzerland and the IMF.

Gold takes about 60.4 percent of the total strategic
reserve in the United States, according to the
Council.

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