Monday, June 26, 2006

Gold , China & India

This two issues are potentially extremely significant:

Call to mix forex reserves
(Shanghai Daily)
Updated: 2006-06-26 10:19

China's bulging foreign-exchange reserves and massive holdings in US treasuries are prompting some economists and researchers to argue the nation should diversify part of its huge reserves into gold and oil.

China should consider buying more gold with its forex reserves to avoid any losses linked to possible devaluation of its US dollar-backed assets, two central bank officials said in a latest research note.

Using some of the forex reserves to buy gold could "maintain and raise the value of China's dollar holdings," Zhao Qingming from the central bank's Financial Research Institute and Luo Bin from its accounting department wrote in a note published in China Money Market this month.

Although it was still unclear whether the comment might signal any policy change by the People's Bank of China, the central bank, it has highlighted a growing concern over mounting risks in forex investments.

China has forex reserves of US$875 billion by the end of the first quarter this year, surpassing Japan's as the world's biggest.

The country now invests around 1.3 percent of its forex reserves in gold, or about 600 tons. That compares with 8,500-odd tons owned by the United States, which accounts for more than 70 percent of that country's forex reserves. -source

Mumbai: With two mutual fund houses planning to launch gold exchange traded funds (GETFs), investors can look forward to invest in a much safer asset class, after being taken on ride in the equity market.

Two Asset Management Companies (AMCs) UTI and Benchmark recently filed their offer documents with market regulator Securities and Exchange Board of India (SEBI) to launch GETFs, which invest in gold as its underlying asset and trades like any other exchange traded fund on the bourses. - source

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