“We recommend China increase its gold reserves to 6,000 metric tons within three-to-five years and possibly to 10,000 tons in eight to 10 years,” the paper quoted Ji as saying. China increased its gold reserves by 76 percent to 1,054 tons since 2003, the official --inhua News Agency reported in April.

China is likely to become the world's largest producer and consumer of gold this year, Rozanna Wozniak, investment research manager at the World Gold Council, said yesterday. The dollar has fallen about 20 percent against the euro since Feb. 18. Dubai World's possible default may give China an opportunity to invest its foreign currency reserves in the metal and oil, Ji said in a separate report by the Economic Information Daily.

“Given the size of their reserves compared with the size of the gold market, there's a limit on how much they can add,” David Barclay, commodity strategist with Standard Chartered Bank in Hong Kong, said today. “But it certainly seems that there's scope for further addition.”

Ji said that the recommendation to buy gold was made by an unidentified group of experts who had convened since last year to discuss the issue, the Youth Daily reported.

Record Prices

The nation increased its reserves to 1,054 tons through domestic purchases and refining scrap metal, Hu --iaolian, head of the State Administration of Foreign Exchange, said in an interview with the --inhua News Agency in April.

China may break records for both demand and output this year as jewelry consumption soars and miners expand production after prices reached all-time highs, Zhang Yongtao, deputy secretary-general of the China Gold Association, said at a conference in Kunming yesterday.

Bullion touched a record $1,195.13 an ounce Nov. 26 as a weaker dollar drove demand for precious metals as an alternative asset. Gold declined 0.4 percent to $1,172.43 an ounce at 2:23 p.m. in Shanghai.

Some of China's foreign exchange reserves should be swapped into gold, which would lessen losses from a depreciating U.S. dollar, the China Youth Daily said, citing Ji. China is underweight on holdings and will increase buying as the economy expands, said Jeffrey Rhodes, chief executive officer of INTL Commodities DMCC, Oct. 23.

China's 1,054 tons of gold represent less than two percent of its reserves, Dubai-based Rhodes said then. That compares with the international average of 10.2 percent held by central banks worldwide which have under 30,000 tons of the metal, equivalent to about $960 billion.

The country may not find it “very necessary” to purchase bullion for its reserves after the price rose above $1,000 an ounce, Zhang Yuyan, an economist at the Chinese Academy of Social Sciences, said Nov. 5.