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South African central bank to build gold reserves slowly

Section: Daily Dispatches

By Michael Hamlyn, Cape Town, South Africa
Friday, March 27, 2009

The [South African] Reserve Bank is planning to increase its hoard of gold, as it juggles the different currencies in which its reserves are denominated.

At present, according to Governor Tito Mboweni, around 11 percent of the country's reserves are in gold. The rest are in a combination of dollars, pounds and euros.

Speaking informally in Cape Town on Thursday evening, the governor said that when he came to the post, 10 years ago, the vaults containing the reserves were virtually empty. Today the reserves amount to as much as 90 percent of the value of the bank's balance sheet.

Mboweni said he has no target for the gold reserves to reach, but will just begin to increase the proportion held in gold slowly.

Bank officials noted that China has proposed a different reserve currency -- possibly based on special drawing rights -- to take the place of the dollar. The Chinese are possibly fearful that a drop in the value of the dollar will wipe out a large proportion of their own reserves.

It is not long since central banks decided to unload much of their gold reserves on to the market in a series of carefully controlled sales.

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