By Hu Xiaocen | 2013-1-11 | ONLINE EDITION
DEMAND for gold is expected to rise as central banks and sovereign funds are likely to reduce US dollar and euro holdings after the financial crisis, a report said today.
"The world is headed towards the uncharted waters of a durable multi-currency reserve system, where the dollar will share its pivotal role with a range of other currencies, including the Chinese yuan," said the World Gold Council and Official Monetary and Financial Institutions Forum in the report.
"Official central bank asset managers around the world are likely to increase their interest in gold as a result of doubts about the overall strength of global monetary arrangements," the report said.
China has the world's largest foreign exchange reserves. According to the People's Bank of China, the holdings topped US$3.31 trillion by the end of last year. The amount is so large that it has no other currency options apart from the US dollar and the euro.
"China has no wish to be unduly dependent on either the dollar or the euro. This is likely to have been an important reason why the Chinese authorities have decided in recent years to boost the share of gold in reserves," the report said.
According to the World Gold Council, China roughly doubled its gold reserves between 2007 and 2012, with holdings of 1,054 tons in July 2012. China is the world's sixth largest holder of monetary gold, but the proportion of gold in relation to total foreign reserves is very low. Only 1.6 percent of China's foreign exchange reserves are held in gold, compared with 75 percent for the US, and 71 percent for Germany, Italy and France.