The Chinese government is unlikely to buy large amounts of gold as a means to diversify its US$2.39 trillion worth foreign exchange reserves, a senior official said, while stressing that "the US treasuries market is very important for China".

But the official cast no light on the prospects for the renminbi (yuan), which has been traded at around 6.83 per dollar since mid-2008, a move some countries speculate keeps the value of renminbi "artificially low" and helps Chinese exporters weather the global credit crunch. "Gold cannot be a major investment to diversify foreign exchange reserves" as purchases could push up gold prices sharply. Also, the average long-term returns on investment in gold are low...