The gold bugs were ecstatic. On Friday, State Administration of Foreign Exchange boss Hu Xiaolian said that China had increased its holdings of gold reserves by 454 tonnes to 1,054 tonnes. Her revelation seemed to confirm one of the gold bulls' most cherished beliefs: that the country is diversifying its enormous stock of foreign exchange reserves out of United States Treasury debt and into bullion in anticipation of a collapse in the value of the US dollar.
The news had an immediate impact on international markets, reversing the drift out of gold seen over the last few weeks and pushing the price of bullion back above US$900 an ounce (see the first chart below).
With gold analysts speculating that Beijing is planning more diversification, with a major programme of gold purchases to lift its official reserves of the metal to 3,000 or even 5,000 tonnes - which would place China second only to the US in the league table of gold hoarders (see the second chart) - hopes are high for further price gains in the near future.
On closer examination, however, the latest increase in the mainland's gold holdings is rather less significant than it appears at first.
The last time China declared any change in its official holdings of gold was at the end of 2002, when the central bank disclosed gold reserves of 600 tonnes, up from 500.8 tonnes the year before. At the time, gold was trading at US$348 an ounce, which means China's 600 tonnes were worth some US$11.19 billion.
At the end of 2002, the People's Bank of China (PBOC) was sitting on foreign reserves worth a total of US$286 billion, so gold made up 3.9 per cent of its overall reserves.
Today, after years of massive accumulation, Beijing has foreign reserves worth US$1.954 trillion. With gold at US$910 an ounce, the 1,054 tonnes of gold it now holds are worth US$30.85 billion.