China should increase its gold holdings to around 5 percent of its total foreign exchange reserves to help diversify currency risks, the World Gold Council (WGC) said.

China currently holds about 1.6 percent of its foreign exchange reserves in gold, which is relatively low compared with developed countries and some developing countries, WGC China Managing Director Roland Wang said.

"The ideal amount should be at least 5 percent of its total forex reserves," Wang told Reuters in an interview in Hong Kong.

China last raised its gold holdings in April 2009, when reserves rose to 33,890,000 troy ounces (about 1,054 tons), from 19,290,000 troy ounces, according to data from the People's Bank of China, the central bank. The holding was unchanged as of December 2014. Data for 2015 was not available on the central bank's website.

China's holdings as a percentage of total reserves in the fourth quarter in 2014 compare with 2.4 percent for Mexico, 5.7 percent for Australia, 6.7 percent for India and 12.1 percent for Russia, according to WGC figures.

Wang said the gold council was in regular communication with Chinese authorities, including the country's central bank and China Gold Association.

Increased gold holdings could boost investor confidence at a time when China is pushing the internationalization of the yuan, he noted.

China's gold consumption fell to 886 tons in 2014, down 25 percent from a year earlier, according to China Gold Association figures.

Reuters