The Chinese government announced Tuesday its intentions to allow more banks to trade gold bullion across international boundaries. The People’s Bank of China also intends to encourage the creation of gold-backed investment vehicles like the SPDR Gold Shares “GLD” exchange-traded fund.
Demand for the yellow metal is booming in China, according to the Financial Times; investors in the world’s largest country bought up 73 tons of gold in 2009, over three times the amount they purchased two years earlier. China is also the world’s largest producer of gold.
The central bank itself declined to outright endorse gold bullion as an investment, although over the past few years, it has accumulated over 1,000 tons of the precious metal.
“This is a positive sign for the gold market,” James Steel, a strategist at HSBC in New York, told the FT. “The Chinese statement reaffirms the vigour of the emerging markets’ demand for retail physical bullion.”
Alongside physical demand and some general uncertainty about the state of the economic recovery, the news helped buoy gold futures, which posted a modest $3.30 rise to $1,188.70 per troy ounce.
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