Gold surged to a three-week high as of Apr 24 2009 , boosted by the prospect of further purchases by China, after the country revealed it had been buying the precious metal since 2003. China has raised its gold reserves by three-quarters since 2003 to1,054 tonnes, confirming speculation that it had been buying in the market for some years.

China's reserves are now the fifth biggest in the world, with only six countries holding more than 1,000 tonnes.

It needs to buy more and some of its purchases could be in the spot market, but UBS thinks there is another way for the country China to quickly boost its gold holdings “The proposed IMF sales of 403.3 tonnes of gold represents the biggest opportunity for China to buy a large amount of gold in one transaction,” it said.

China could buy gold in the open market and add to its holdings, although it would only be able to do so at a slow and steady rate: any move to buy large amounts of gold would have a large market impact.” China's news over shadowed a rise in equity markets, which in recent weeks has dampened investor enthusiasm for gold, seen in the holdings by the world's largest gold-backed exchange-traded fund, the SPDR GoldTrust.

A 44 per cent surge in SPDR's holdings since the start of the year had helped underpin gold prices, but the last increase was nearly a month ago.However traders say renewed dollar weakness will also help sentiment in the gold and precious metals markets.