Gold Investment Demand Rising in China

Countries with growing market economies are leading the way in precious metal investing. The gold investment demand in China has grown exponentially in recent years as individuals and the Central Bank of China search for ways to secure their wealth. The decreasing value of the U.S. dollar along with ineffective monetary policies in the United States have created a tense relationship between the U.S. and China.

As Li Daokui, adviser to the Central Bank of China, said, “I think there is a risk that the U.S. debt default may happen. The result will be very serious and I really hope that they would stop playing with fire.”

A default would further undermine the U.S. dollar. Since China is the largest foreign creditor to the U.S., it hopes to persuade the U.S. government to take less detrimental measures. Daokui said, “I really worry about the risks of a U.S. debt default, which I think may lead to a decline in the dollar's value.”

The economic depression in the United States has been caused by a number of factors and has led investors around the world to seek alternative investments that are not heavily reliant on the U.S. dollar. Economic growth in the United States is going at a snail’s pace due to several economic problems. As the Federal Open Market Committee (FOMC) reported, the reduction in economic growth “reflected the persistent weakness in the housing market, the ongoing efforts by some households to reduce debt burdens, the recent sluggish growth of income and consumption, the fiscal contraction at all levels of government, and the effects of uncertainty regarding the economic outlook and future tax and regulatory policies on the willingness of firms to hire and invest.”

China isn’t the only country whose citizens are relying on a gold investment to preserve their purchasing power. Individuals around the globe are losing faith in fiat currency and beginning to understand the real value that gold retains no matter what the state of the global economy.

Several national central banks are also amassing precious metals to secure wealth. For instance, the Central Bank of Mexico recently made a gold investment that equaled 100 tons of the yellow metal. The Central Bank of Russia recently purchased an additional 200,000 ounces of the precious metal bringing the total gold holdings of Russia to 26.7 million ounces. Central bank gold purchases have given countless investors greater confidence in the benefits of precious metal investing.

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