Tuesday May 9, 6:13 PM

China urged to quadruple gold reserves - paper

"China should raise its gold reserves so those reserves can account for 3 percent to 5 percent of the foreign exchange reserves, instead of current 1.3 percent," the China Gold quoted Liu Shanen, an expert at Beijing Gold Economy Development Research Centre, as telling a conference.

He said the suggestion was made in light of the country's economic strength and the size of its foreign trade.

China's foreign exchange reserves rose to a record $875.1 billion by the end of March on the back of a surge in its trade surplus and an increase in foreign direct investment.

"More gold reserves will help the government prevent risks and handle emergencies in case of future possible turbulence in the international political and economic situation," the paper said, citing Tan Yaling, a researcher with the Bank of China.

A weak dollar had also made more gold holdings necessary, it quoted Liao Yingmin as saying. Liao is a researcher at the Development Research Center of the State Council, a government think-tank.

China has been trying to gradually diversify its reserve holdings away from the dollar. But economists say fears of a collapse in the U.S currency will prevent any dramatic shift.

Central bank official figures showed China's gold reserves have remained unchanged since December 2002.

Gold has gained 32 percent this year due to tension in the Middle East, firm oil prices and a volatile dollar. Spot gold was quoted at $679.90 an ounce by 0959 GMT.

Traders in London anticipated the price to test 25-year high of $684.70 an ounce.