China holds $2.85 trillion in foreign reserves, which means the country would need to buy roughly 66,000 tons of gold to fully back its currency. Even if the country upped the ante to just 3%, the country would need to buy 1,000 tons. Technically, a full gold standard isn't an option. Under the IMF's first amendment to Article IV of Agreement, ratified in 1978, participating countries are not allowed to peg their currency to gold. But that doesn't mean that China won't try to legitimize its currency by ramping up its gold holdings. The U.S., which sports the current world reserve currency, holds more than 8,000 tons of gold, more than 8 times the size of the SPDR Gold Shares ( GLD). Not only has China been furiously buying gold, but local gold producers have been looking outside the country to find more gold. State-controlled China National Gold Corp bought half of Coeur d'Alene Mines ( CDE)' gold concentrates from its Kensington gold mine in Alaska. China has also been telling its citizens to buy gold, promoting different gold funds, giving investors access to overseas products and launching a global gold contract based in yuan by Chinese Gold & Silver Exchange. The ICBC and World Gold Council recently teamed up for the creation of the Only Gold Gift Bar in China, where a customer can buy gold as a gift complete with engraving and can sell it back to the ICBC for cash. "Private citizens have bought more gold in the last 30 months than the People's Bank of China owns altogether," says Adrian Ash, head of research for BullionVault.com. There are also no individual property rights in China, so all the gold citizens own really belongs to China, whether the country would confiscate it is a different story.
Alix Steel. >To follow the writer on Twitter, go to http://twitter.com/adsteel. >To submit a news tip, send an email to: email@example.com.