Gold prices jumped on the news and were up 1 percent on the day at $910.80 an ounce at 0540 GMT. By a Reuters calculation, CHINA'S HOLDING OF GOLD WOULD BE WORTH $30.9 BILLION AT CURRENT PRICES. China's reserves were now the fifth biggest in the world, with only six countries holding more than 1,000 tons, she said.
Hou Huimin, vice general secretary of the China Gold Association, said China should build its reserves to 5,000 tons.

"It's not a matter of a few hundred, or 1,000 tons. China should hold more because of its new international status, and because of the financial crisis," he said. "The financial crisis means the U.S. dollar value is changing fast, and it may retreat from being the international reserve currency. If that happens, whoever holds gold will be at an advantage."

On Wednesday a local Taliban militia crossed from the Swat Valley — where a February cease-fire allowed the implementation of strict Islamic, or Shari'a, law — into the neighboring Buner district, which is just a few hours drive from Islamabad - 65 miles, separated by a mountain range, as the crow flies. Residents streaming from Buner, home to nearly a million people, told local newspapers that armed militants are patrolling the streets. Pakistani television stations aired footage of Taliban soldiers looting government offices and capturing vehicles belonging to aid organizations and development projects. The police, say residents, are nowhere to be seen.

Meanwhile courts throughout the Malakand division, of which Swat and Buner are a part, have closed in deference to the new agreement calling for the implementation Shari'a, law. "IF THE TALIBAN CONTINUE TO MOVE AT THIS PACE THEY WILL SOON BE KNOCKING AT THE DOORS OF ISLAMABAD," Maulana Fazlur Rehman, head of one of the country's Islamic political parties, warned in Parliament Wednesday. Rehman said the Margalla Hills, a small mountain range north of the capital that separates it from Buner, appears to be "the only hurdle in their march toward the federal capital," The only solution, he said, was for the entire nation to accept Shari'a law in order to deprive the Taliban of their principal cause.

The fall of Buner is raising international alarm. Speaking before the House Foreign Affairs Committee in Washington Wednesday, Secretary of State Hillary Clinton characterized the situation was a danger to Pakistan, the U.S. and the world. "We cannot underscore the seriousness of the existential threat posed to the state of Pakistan by continuing advances, now within hours of Islamabad, that are being made by a loosely confederated group of terrorists and others WHO ARE SEEKING THE OVERTHROW OF THE PAKISTANI STATE," Clinton said. She also accused Pakistan's leaders of "basically abdicating to the Taliban and the extremists" by signing the cease-fire agreement.

It's been a bad week for German Chancellor Angela Merkel. At the start of the week, she tried to cheer up her compatriots, saying the economy showed signs it may be bottoming out. Since then, though, it's been one negative economic development after the next. THE GERMAN ECONOMY IS IN A NOSE DIVE and is already in its worst slump in almost 80 years. Indeed Hans-Werner Sinn, the head of the respected Munich-based Ifo Institute economic think tank, is describing the current crisis as the "worst depression" since the global economic downturn of the 1930s.

On Thursday, Germany's leading economic think tanks concurred in a report that the economy would likely shrink in 2009 by 6 percent of gross domestic product. The International Monetary Fund is estimating a downturn of 5.6 percent.

With the situation looking dire, on Thursday the center-left Social Democrats' candidate for the largely symbolic office of German president, Gesine Schwan, warned that SOCIAL UNREST, some of which has already been seen in other parts of Europe, could soon be lurking around the corner in Germany. "I can imagine that in two to three months the people's anger could increase markedly," Schwan told the Münchener Merkur newspaper. IF PEOPLE HAVE NO HOPE FOR AN IMPROVED SITUATION, SHE WARNED, IT COULD GET EXPLOSIVE. With no end in sight for the crisis, it's getting increasingly difficult for the German government to buoy spirits.

In their wake hundreds of houses and a handful of businesses in Montigny-lès-Cormeilles are left without electricity for much of the morning. Redundancy plans have caused violent protests in private sector companies, left-wing students have blocked universities and unions are planning a demonstration on Labour Day. "THERE IS A RISK OF REVOLUTION," Dominique de Villepin, the former prime minister, said.

For Stéphane Miliadis, a representative of the Confédération Générale du Travail union at the EdF plant in Saint-Ouen-l'Aumône, near Montigny-lès-Cormeilles, it offers a golden opportunity. "THE GOVERNMENT IS LOSING CONTROL," he said. "So now is the moment to push back the capitalist logic which has crept into the company."

Last Thursday 66,500 EdF customers lost their electricity supply, some for several hours. In Douai, northern France, two patients in intensive care had to be moved when a hospital lost power for 40 minutes. Earlier this week the activists sought to win public support by switching 350,000 customers from peak to off-peak tariffs — a 50 per cent saving. They also restored power to hundreds of households that were cut off by EdF because they had failed to pay their bills.

Signaling U.S. impatience with Prime Minister Benjamin Netanyahu's reticence over peace talks, Clinton said Arab nations had made clear to her that Israel must be committed to the Palestinian peace process if it wants help countering Iran. "For Israel to get the kind of strong support it is looking for vis-à-vis Iran, it can't stay on the sidelines with respect to the Palestinians and the peace efforts. They go hand in hand," she told the House of Representatives Appropriations Committee. Israel sees a nuclear-armed threat as a mortal threat.

"They (Arab countries) believe that Israel's willingness to re-enter into discussions with the Palestinian Authority strengthens them in being able to deal with Iran," she added. Since coming into power last month, Netanyahu and his right-leaning coalition have avoided recognizing the Palestinians' right to an independent state as his predecessor Ehud Olmert did.

THE UNITED STATES IS COMMITTED TO PUSHING FOR A TWO-STATE SOLUTION, with Israelis and Palestinians living side by side, and would like to revive stalled talks. Netanyahu is set to visit Washington early next month. Clinton said she was not going to prejudge the Israeli position until there had been face-to-face talks with him.

That amounts to an extraordinary £28,000 for every household in the country. Yet Mr Darling PROMPTED DISBELIEF IN BOTH PARLIAMENT AND THE CITY as he claimed a potent economic rebound will begin to staunch the flow of red ink early in the next decade.

He added that the economy will be back to growth of 3.5 per cent by 2011 after contracting by the same amount this year. Mr Darling said a recovery in tax receipts will halve the deficit within four years. ECONOMISTS AND MPS POURED SCORN ON THE PREDICTIONS, SAYING THE GOVERNMENT WAS GUILTY OF PIE-IN-THE-SKY OPTIMISM. This bogus and dishonest mix was not a Budget for Britain but A DESPERATE BID TO CLING TO POWER.

Mrs Obama started work on the kitchen garden with a gang of schoolchildren last month. Media coverage of the first White House food plot since Eleanor Roosevelt "dug for victory" in the Second World War garnered media coverage across the world. But to the consternation of Big Ag, Mrs Obama has said the project will not use chemical products to tackle pests or give her plants a boost, the Times reports.

Shortly after the digging began, Mrs Obama received a letter from the Mid-America CropLife Association (MACA), which represents THE COMPANIES PRODUCING THE PESTICIDES AND FERTILISERS UNDERPINNING "CONVENTIONAL" AMERICAN AGRICULTURE, the paper said. Addressed to "Mrs Barack Obama", the letter congratulated the First Lady on "recognising the importance of agriculture in America". Farming is America's largest industry, generating 20 per cent of GDP and directly or indirectly employing 22 million people.

THE LETTER AVOIDING THE TERM "ORGANIC", highlights the role of technological advances - technologies that can see a single acre produce almost 20 tonnes of strawberries or 110,000 heads of lettuce in a season - in modern agriculture. "Today, an average farmer produces enough food to feed 144 Americans who are living longer lives than many of their ancestors. Technology in agriculture has allowed for the development of much of what we know and use in our lives today," MACA wrote.

"If Americans were still required to farm to support their family's basic food and fibre needs, would the US have been leaders in the advancement of science, communication, education, medicine, transportation and the arts? We live in a very different world than that of our grandparents. Americans are juggling jobs with the needs of children and ageing parents. The time needed to tend a garden is not there for the majority of our citizens, certainly not a garden of sufficient productivity to supply much of a family's year-round food needs."

The carefully-worded letter also "respectfully" encourages Mrs Obama to recognise the role played BY CONVENTIONAL AGRICULTURE in feeding America's growing population.

They are military robots and their rapidly increasing numbers and growing sophistication may herald the end of thousands of years of human monopoly on fighting war. "SCIENCE FICTION IS MOVING TO THE BATTLEFIELD. THE FUTURE IS UPON US," as Brookings scholar Peter Singer put it to a conference of experts at the US Army War College in Pennsylvania this month. Singer just published Wired For War - the Robotics Revolution and Conflict in the 21st Century, a book that traces the rise of the machines and predicts that in future wars they will not only play greater roles in executing missions but also in planning them.

Numbers reflect the explosive growth of robotic systems. The US forces that stormed into Iraq in 2003 had no robots on the ground. There were none in Afghanistan either. Now those two wars are fought with the help of an estimated 12,000 GROUND-BASED ROBOTS AND 7,000 UNMANNED AERIAL VEHICLES (UAVs), the technical term for drone, or robotic aircraft.

Ground-based robots in Iraq have saved hundreds of lives, defusing improvised explosive devices, which account for more than 40 percent of US casualties. The first armed robot was deployed in Iraq in 2007 and it is as lethal as its acronym is long: Special Weapons Observation Remote Reconnaissance Direct Action System (SWORDS). Its mounted M249 machinegun can hit a target more than 3,000 feet away with pin-point precision.

From the air, the best-known UAV, the Predator, has killed dozens of insurgent leaders - as well as scores of civilians whose death has prompted protests both from Afghanistan and Pakistan. The Predators are flown by operators sitting in front of television monitors in cubicles at Creech Air Force Base in Nevada, 8,000 miles from Afghanistan and Taliban sanctuaries on the Pakistani side of the border with Afghanistan. The cubicle pilots in Nevada run no physical risks whatever, a novelty for men engaged in war.

Merkel shrugged off calls for more spending despite a report by Germany's leading economic institutes which will show tomorrow that Europe's biggest economy may shrink as much as 6 percent this year - almost three times the contraction of 2.25 percent forecast by the government in January.

The coalition won't expand its 82 billion euro ($107 billion) stimulus agreed under two separate programs, Merkel told reporters in Berlin today after a meeting with business leaders and economists. "We shouldn't talk about a third stimulus package," Merkel said. "Instead we'll let current measures take effect." The chancellor's comments echo statements today by her finance and economy ministers underlining unity in the coalition over not stretching the budget more to pay for new stimulus steps.

A leaked report from Germany's leading economic institutes - confirmed by a government official - forecast the economy may shrink 6 percent this year, a steeper decline than that expected in the UK. The IMF predicted the German economy will shrink by 5.6 percent compared with 4.1 percent in the UK, 2.8 percent in the US and 3 percent in France.

She said extremists were being allowed to control territory such as the Swat Valley, in north-western Pakistan. She also called Pakistan's judicial system corrupt, adding that it has only limited power in the countryside. Earlier this month, Pakistani President Ali Zardari signed a law implementing Islamic law - or Sharia - in the Swat Valley region as part of a deal to end a two-year Taleban insurgency there.

Once one of Pakistan's most popular holiday destinations, the Swat Valley is now mostly under Taleban control. Thousands of people have fled and hundreds of schools have been destroyed as a result of a Taleban-led insurgency. The Swat Valley is only about 100km (62 miles) from Islamabad, and reports suggest the Taleban are trying to expand the area under their control.

Giving evidence in Washington to the House Foreign Affairs Committee, Mrs Clinton said the situation in Pakistan "poses a mortal threat to the security and safety of our country and the world. I think the Pakistani government is basically abdicating to the Taleban and the extremists," she said.

The unprecedented borrowing programme sparked warnings that a generation of British workers face higher taxes to pay off the debt, and raised doubts about international investors' willingness to go on lending to the UK. The final figures could be even higher, since Mr Darling based his borrowing plans on an assumption that the UK economy will start to grow again later this year and rebound sharply by 2011.

According to projections in the Budget, public sector net debt, the accumulated stock of outstanding Government borrowing, will reach £1,370 billion in 2013/14. When Labour took office in 1997, debt was £350 billion. In November, Mr Darling said borrowing would peak at £118 billion during this financial year, falling to £105 billion next year.

But in his Budget yesterday, the Chancellor admitted that collapsing tax revenues meant he would now have to borrow £175 billion in 2009/10. That is 12.4 per cent of gross domestic product (GDP), the biggest annual deficit ever recorded in peacetime. Borrowing will be £173 billion in 2010/11, Mr Darling said. Overall, he announced £703 billion of borrowing over five years.

The Chancellor raised the spectre of a 70s-style brain drain in his second Budget as he ignored advice not to raise taxes on wealth creators to cope with "the most serious economic crisis for 60 years," which will see national debt hit £1.37 trillion in 2013/14. Business leaders said the move to tax those earning over £150,000 a year from next April would hurt the UK's position as a global financial centre and undermine initiatives in his "Budget for Jobs".

The Institute of Directors said the income tax increase "sends out all the wrong signals". Miles Templeman, the IoD director-general, said: "The increase will have a damaging impact on the wider economy and undermine the UK's attractiveness as a place to invest." Richard Lambert, director-general of the influential CBI, said: "The key question for this Budget was whether it set out a credible and rigorous path for restoring the public finances to health. The CBI's preliminary judgement must be that it does not."

In pushing to a new 50p income tax rate, the Chancellor broke Labour's 2005 General Election manifesto pledge which said: "We will not raise the basic or top rates of income tax in the next parliament". He also announced plans to cut back on tax relief on pension contributions made by people who earn more than £150,000.

He also cut future spending plans in a Budget which added 2p on fuel, 1p on a pint of beer and 7p on cigarettes. The package would steer the UK through to recovery, he said. The Tories said the economy was in an "utter mess". Total government debt will double to 79% of GDP by 2013 - the highest level since the Second World War. The annual budget deficit will rise sharply to £175bn for the next two years. The Budget received a cool reception in the City with the pound down - and the Confederation of British Industry said it did not set out a "credible and rigorous" path to recovery.

In other Budget measures, fuel duty will increase by 2p per litre in September and then by 1p a litre above inflation each April for the next four years. Alcohol duties will go up by 2% - about 4p on a bottle of wine and 13p on a bottle of spirits - from midnight. Mr Darling said the various tax raising measures would raise more than £6bn by 2012.

In his speech, Mr Darling confirmed the economy would shrink by 3.5% in 2009 - far worse than his pre-Budget forecasts. Public borrowing will also soar to record levels as the Treasury wrestles with a combination of falling tax receipts, higher spending and the cost of bank bail-outs. But Mr Darling insisted other major countries were suffering a worse downturn.

The news could herald widespread pay freezes or cuts because the RPI is used by many employers to set wages. It also suggests the deepening recession is forcing firms to slash prices. Coming on the eve of one of the most difficult Budget statements since the Second World War, the report is a serious concern for Gordon Brown and Chancellor Alistair Darling.

It will also cause alarm at the Bank of England, which is printing at least £75billion of fresh cash to prevent a deflationary spiral. "Falling headline inflation masks the fact that many older people's real rate of inflation remains far higher than the average," said Michelle Mitchell, of the charity Help the Aged and Age Concern. "Most older people aren't benefiting from falling mortgage interest rates, which are driving down inflation, and are still struggling with high food and fuel bills."

Pensioners are being particularly badly stung by rising utility bills and the cost of everyday household essentials. Costs of food and non-alcoholic drinks also rose rapidly, with a 10.5 per cent annual gain. The price of meat was up 14.6 per cent, while vegetable costs rose 15.8 per cent and the price of tea, coffee and cocoa increased 14.1 per cent.

The peace process has been beset by conflict and adversity which President Barack Obama has pledged to address. There is no indication the Arab and Israeli leaders will meet directly. Mr Obama's spokesman Robert Gibbs said the visits were likely to take place before the president's scheduled trip to France on 6 June.

"With each of them the president will discuss ways the United States can strengthen and deepen our partnerships with them, AS WELL AS THE STEPS ALL PARTIES MUST TAKE TO ACHIEVE PEACE BETWEEN ISRAEL AND THE PALESTINIANS AND ISRAEL AND THE ARAB STATES," Mr Gibbs told a news conference.

He said the invitations had been extended after Mr Obama met Jordan's King Abdullah II at the White House on Tuesday. Mr Obama has "invited other key partners in the effort to achieve a comprehensive peace in the Middle East to the White House in the coming weeks". He added: "We are actively working to finalise dates for the visits."