China Warns on Gold Prices

NEW YORK (TheStreet) -- China warns of an asset bubble, but gold prices are fearless.

The People's Bank of China's vice governor, Hu Xiaolian told reporters in Taipei that "gold prices are currently high and commodities markets should be careful of a potential asset bubble forming." Reuters reported that his answer was in response to the question would China increase its gold reserves in the future.

China has been buying gold over the past 12 months as central banks worldwide transition from being net sellers of gold to net buyers. It was recently rumored that China could be a buyer of the remaining 200 tons of gold from the IMF. Some analysts speculate that perhaps China is trying to bring gold prices down to more attractive buying levels. However, Jon Nadler, senior analyst at Kitco.com, argues that "central banks in general look at foreign reserve management as an ongoing policy.... Price is really not an issue, it's a percentage issue."

At the same time, gold prices hit another new high of $1,218 an ounce on the back of a weakening U.S. dollar. Gold delivery for February was adding $13.80 to $1,213 an ounce at the Comex division of the New York Mercantile Exchange. The contract has traded as high as $1,218.40 and as low as $1,196.50. The U.S. dollar index was down .02% to $74.42 well under the $75 level.

Silver prices were rising 6 cents to $19.27 while copper was flat at $3.23.

In mining stocks, a more leveraged way to invest in gold, Barrick Gold(ABX) was rising slightly to $46.62 while Newmont Mining(NEM) was trading at $55.83. Shares of Freeport McMoran Copper & Gold(FCX) were higher by 1% to $84.61. AngloGold Ashanti(AU) was up .50% to $46 .88.