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Nov. 17 (Bloomberg) -- China is considering gradually increasing the nation’s gold reserves, the 21st Century Business Herald reported today, citing an unidentified consultant to the government.

There are limits to China’s ability to increase gold holdings on a large scale within a short time, so the gains in the government reserves will be a slow, incremental process, the newspaper said, citing the consultant. China currently has 1,064 metric tons of gold, accounting for 1.6 percent of its foreign exchange reserves, it added.

Gold has gained 22 percent this year, reaching a record $1,424.60 on Nov. 9, as a weakening dollar and concern about the global recovery has spurred demand for a store of value. China should purchase gold and oil overseas with its foreign-exchange reserves to avoid losses from a weakening dollar, Shao Fenggao, an official at China Construction Bank Corp., said on Nov. 1.

“People have always been speculating about China’s gold reserves, but I think there is not much point in second-guessing whether the government is going to buy gold,” Ronald Wang, general manager for greater China at the World Gold Council, said by phone from Beijing today. “They have access to information and they must have a plan with regard to gold.”

China remained the biggest foreign holder of U.S. Treasuries, after its holdings rose by $15.1 billion to $883.5 billion in September from $868.4 billion in August, according to the Treasury’s statistics.

Low Holdings

China’s gold holdings are far lower than the 8,133 tons held by the U.S. government, and are only higher than 25 countries of the 110 countries tracked by the International Monetary Fund, the newspaper said.

Meng Qingfa, a researcher at the China Chamber of International Commerce, wrote last month in the International Business Daily that China should increase its gold holdings.

China’s gold market may double in the next decade as retail investment and jewelry demand gain, the council’s Wang said Nov. 3. Demand may gain to 800 tons to 900 tons in the next ten years, Wang said. China’s jewelry and investment gold demand was 428 tons in 2009, according to the council.

Immediate-delivery gold fell 0.2 percent to $1,337.10 an ounce at 11:16 a.m. Shanghai time, heading for the longest slump since July.

--Feiwen Rong. Editors: Richard Dobson, Jarrett Banks.