Is China using gold to internationalize the yuan?

It adds that the authorities may possibly be moving in the direction of using gold in a plan to make the yuan an international currency.

Beijing has said that it does not view gold as a useful asset for diversifying the country's $3.8 trillion worth of foreign exchange reserves, according to media reports.

(Read more: China posts blowout trade data, exports jump 10.6% )

China's official reserves of gold stand at 1,054 metric tons, that's worth about $45 billion. This figure has not been updated since 2009 and Lombard says the number may not be accurate because since that last update imports of gold and domestic production amount to over 4,500 metric tons.

"The massive flow of gold into the country does make it seem plausible that they [China's authorities] could be moving in the direction of using gold in the effort to internationalize the currency and escape what is seen as a domineering dollar," Lombard economist Freya Beamish said in a note published late Wednesday.

(Read more: Yuan now one of the world's most tradable currencies )

In fact, latest official data shows that China imported and produced more gold last year than its consumers bought, fueling speculation that the authorities took last year's dive in the price of gold to build up holdings of the precious metal. Gold prices fell 28 percent last year.

Read More: sg.finance.yahoo.com/news/china-using-gold-internationalize-yuan-011254686.html