NEW YORK/LONDON (Reuters) - Six years ago, when China last unveiled how much gold was sitting in its central bank vaults, local industry figures and global gold bugs were convinced that Beijing was on the brink of a buying spree that could transform the market.
After buying a relatively meager 454 tonnes in the six years to 2009, as China's economy raced ahead, the People's Bank of China's ultra-secret bullion buying was expected to accelerate as it spread risk away from its trillions of U.S. dollars.
On Friday, that optimism proved to be ill-founded when China gave a rare glimpse into the size of its gold stash.
It said it has added 604 tonnes, worth $22 billion at current prices, since 2009.
That means China's bought only slightly more gold over the past six years than it did in the prior six. Based on the average annual pace, China would have purchased less gold in the last year than Russia did in that period. [ID:nL4N0ZX39R]
And as China's foreign exchange reserves expanded far faster than its gold reserves, the share of gold fell to 1.65 percent, down from 1.85 percent before and still far below what some analysts believe is optimal in the long term.
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Yet despite this brief window of transparency - China considers its gold holdings a state secret and does not report its holdings on a monthly basis to the International Monetary Fund as most other countries do - most analysts remain confident that China will become a bigger bullish force for bullion as the country vies to position the yuan as a global reserve currency.
Ideally, China's bullion hoard should represent as much as 15 percent of its foreign reserves, Capital Economics commodities economist Simona Gamberini said.
"This does suggest that there is more buying to come," Gamberini said in a note.
The amount is tiny compared with more than 70 percent allotted by the U.S. Federal Reserve and the amount allotted by the European Central Bank, which holds about a quarter of its reserves in gold.
Still, based on China's current foreign reserves and prices, 15 percent would equate to a whopping 14,000 tonnes of gold worth some $555 billion, according to Reuters' calculations.
That would eclipse the combined gold holdings of the United States, Germany and Italy, the world's top-ranking central banks by gold reserves.
Mark O'Byrne, research director of bullion dealer GoldCore in Dublin, went as far as to predict China could begin to accumulate a minimum of 100 tonnes a month.
THE 15 PERCENT
China's latest gold purchases took its total to just under 1,700 tonnes.
Leapfrogging Russia, China is now the sixth largest official sector gold holder after the United States, Germany, the International Monetary Fund, Italy and France.
After years of bumper imports and rising domestic output from the world's top producer and consumer of the metal, the total was much smaller than analysts and gold experts had hoped.
Market consensus had pegged the total at more than double the published number, Ross Norman, chief executive of bullion brokerage Sharps Pixley in London, said.
In 2009 when the PBoC last revealed details of its hoard, Hou Huimin, who was vice general secretary of the China Gold Association - an industry body that works closely with the government - predicted the central bank would build its bullion reserves to as much as 5,000 tonnes.
Still, even at the slower pace, analysts say bulking up over time will remain a long-term support for prices as the market remains out of favor with institutional investors against an impending U.S. interest rate hike.
Gold is on track to fall for a third year running, dropping more than 3 percent so far this year. On Friday, prices languished near their lowest level in eight months, around $1,131 per ounce.
Beijing gave little away on Friday about its strategy, but said the additional tonnage would guarantee the security, liquidity and value of China's international reserves.
HSBC analyst James Steel said China's steady buying may spur other emerging economies to follow suit, cushioning any price pressure.
"It means the supply-demand balances are tighter and it reaffirms the impact of central banks and their buying. In the medium to long term, it's bullish."
(Reporting by Josephine Mason and Marcy Nicholson in New York and Jan Harvey in London; Editing by Leslie Adler)