Chinese gold cheaper than IMF's - ex-PBOC adviser

By Zhou Xin and Tom Miles

BEIJING (Reuters) - It would be cheaper for China to buy domestically mined gold than purchase bullion the International Monetary Fund is seeking to sell, a former adviser to the People's Bank of China said on Thursday.

Asked whether China should emulate India, which last month bought 200 tonnes of IMF gold at an average price of $1,045 an ounce, Li Yang told reporters on the sidelines of a financial forum: "China's gold is much cheaper than that."

Li, who used to be a member of the PBOC's monetary policy committee, is now a senior researcher at the Chinese Academy of Social Sciences.

China, the world's top producer and consumer of gold, is widely assumed to still be buying up domestic gold production after revealing in April that it held 1,054 tonnes of gold, a jump of 76 percent from its last word on the subject six years previously.

And its colossal buying power -- $2.27 trillion in foreign exchange reserves at the end of September -- makes matching India's $6.7 billion IMF purchase look trifling.

Many market watchers see China buying IMF gold as likely, if not inevitable, because of its desire to diversify its financial reserves away from U.S. dollars.

That was an important consideration, said a senior central bank official, although one with no direct authority over gold buying.

"China is the world's biggest gold producer, so there's no urgency for us, as there is for India, to snap up big volumes whenever they come onto the global market. It's cheaper for us to buy gold from the Chinese market, but it doesn't help diversify our huge foreign exchange reserves," said the official, who declined to be identified.