Down on U.S. treasuries, China is the likely candidate to scoop up some or all of the 191 tonnes of gold that the International Monetary Fund put on the block last week, says Alan Heap, analyst, Citigroup Capital Markets.
The IMF said that sales would be phased over time, but left open the possibility of direct transfers to central banks. The proceeds will be used to fund new loans to developing countries.
"The [People's Bank of China] is deeply dissatisfied with the performance of its US treasury holdings and has made clear its intention to diversify including into gold," said Alan Heap, analyst Citigroup Capital Markets.
"In November and December the PBC sold US$46-billion of treasures; they must be buying something."
Mr. Heap maintained his second half 2010 gold forecast of US$1,162 per ounce, noting two of the main risks to his estimate, fiscal deficit concerns and inflation, are both pointed to the upside.