China should go for gold: PBOC adviser

The country's foreign currency reserves should be used to buy gold and oil in order to hedge against a possible sharp fall in the value of the US dollar, an adviser to the People's Bank of China said. Already the second largest investor in US Treasury bills and the largest holder of foreign currency, China is likely to use new reserves to diversify away from the dollar and invest in other assets, PBOC committee member Yu Yongding told Bloomberg. The country's foreign exchange reserves reached US$875.1 billion by the end of 2005 and are widely expected to pass the US$1 trillion mark this year. Economists estimate that more than two-thirds of this is spent on US dollar-denominated assets, while gold accounts for just 1%. Yu also called for an independent body to manage these reserves, citing the success of the Government of Singapore Investment Corp.