(Yicai) Aug. 8 -- China’s foreign exchange reserves climbed 1 percent last month from the previous month, while the nation’s gold reserves stayed the same for the third month in a row.

China’s forex holdings expanded by USD34 billion to USD3.26 trillion in July from June, the State Administration for Foreign Exchange said yesterday.

The People’s Bank of China, the country’s central bank, has put a freeze on adding to its gold reserves since April after they swelled for eighteen straight months. It had 72.8 million ounces of gold at the end of July, the same as in May and June.

The SAFE attributed the expansion in forex reserves to the weakening of the US Dollar Index, which is a measure of the greenback’s value relative to a basket of foreign currencies, and the strengthening of global asset prices on the back of factors such as monetary policies and expectations in major economies as well as macroeconomic data.

Last month, the US Dollar Index tumbled 1.75 percent and the Japanese Yen appreciated about 5 percent against the greenback.

“The US economy is now noticeably weakening and the US Dollar Index will stay on a downward trend for a long time to come,” said Zhao Qingming, vice president of the China Foreign Exchange Investment Research Institute. “The strengthening of non-US Dollar currencies will contribute positively to the exchange rate translations of China’s forex reserves.”

China’s economy is operating stably and continues to develop in a steady upward trend, which supports the basic stability of the forex reserves, the SAFE said.

The price of gold has gone up in the past few years as a number of emerging markets have hiked their gold hauls, Zhao said. However, prices are now greatly overestimated compared with the past and will inevitably come down at some point. China’s central bank has stopped buying gold for the past three months and this is a sensible move, he added.

“Nevertheless, gold prices will continue to rise in the long run because developed countries are issuing too much currency,” Zhao added.

Editor: Kim Taylor