* Says global policymakers need to acknowledge role of gold
* Does not believe world can return to fixed FX system (Adds details)
By Kevin Lim and Nopporn Wong-Anan
SINGAPORE, Nov 10 (Reuters) - World Bank President Robert Zoellick said on Wednesday he was not advocating a return to a gold standard for exchange rates, but described the metal as "the elephant in the room" that policymakers needed to acknowledge.
Zoellick, who was attending an infrastructure conference organised by the World Bank and the Singapore government, said it was important for nations to look beyond exchange rates and focus on economic fundamentals.
"I don't believe you can return to a fixed exchange rate system and that is the gold standard," he later told the Foreign Correspondents Association."
"Markets are already using gold as an alternative monetary asset because confidence is low...it is saying we have a problem that needs to be fixed."
Gold prices have soared to record levels in recent weeks and are currently around $1,400 per ounce.
"There is an elephant in the room and that is what I want people to recognise," Zoellick said.
Zoellick earlier this week surprised financial markets by suggesting the world's largest nations consider gold as an indicator to help set foreign exchange rates, amid concerns governments and central banks may try to kickstart their economies by devaluing their currencies.
He said on Wednesday: "I'm not advocating a return to the 19th century when money supply was linked to gold."
The former U.S. trade representative, who served in several Republican administrations including Treasury, has said any new system "is likely to need to involve the dollar, the euro, the yen, the pound and (a Chinese yuan) that moves towards internationalisation and then an open capital account".
The idea drew criticism from many policymakers and economists and there was no indication it was on the agenda for the summit of G20 nations later this week.
Many other pivotal issues are besetting economic policymakers attending the meeting, including a global framework for balanced growth and the surge of capital inflows into developing markets. The G20 groups Argentina, Australia, Brazil, Britain, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey and the United States.
Zoellick said China was more likely to allow its yuan currency to appreciate, a key demand of the United States, if there could be an agreement on economic fundamentals.
"I have a long stated belief, that the renminbi should appreciate, that you are more likely to be able to move forward toward appreciation if you get some agreement on some of the underlying economic fundamentals."
The United States has frequently criticised China, saying it deliberately undervalues its currency to boost exports. China says that the United States, via the Fed, is engaged in the same practice.
On the global economic policy debate, Zoellick said: "We have to move away from what sometimes has become a zero-sum debate on rebalancing, which sometimes is described as a shift in aggregate demand as opposed to rebuilding (and) sources of growth.
"If you have healthy global growth, the currency adjustment will be easier." (Writing by Raju Gopalakrishnan; Editing by Kim Coghill)