People have always considered gold a valuable metal. It has been bought and sold all around the world. However, since strong currencies such as the American dollar and the European euro have gained power, gold jumped back two places in the most popular reserve asset rank. Despite the economic crisis which hit the USA, the dollar remained the most stable currency. But like all paper currencies the dollar can also be threatened by inflation. Gold on the other hand can be considered a tool in the fight against inflation since its tangible value does not depend on the economic evolution of any state.
When the recession put in danger the paper currencies reserves, central banks all around the world started to invest in gold. Among them three countries stood out as massive investors in the precious metal: Russia, India and China. Russia’s acquisitions of gold followed a continuous path for over four years now. The country also invested in its own production by buying gold extracted from Russian mines. The reasons are evident: protection against inflation and prestige.
The world’s largest gold producer, China, also considered it a good idea to buy its own gold although the operation did not always take place over the counter. Yet, in 2009, the Asian country admitted that its gold reserves have increased with 76 percent since 2003. But why does China choose to be so mysterious about its investments in the precious metal? The most obvious reason is its position as world’s number one holder of America’s treasuries. The gold so far acquired by China represents only around 1.5 percent of its overall reserves.
The country invested massively in US Government bonds, but the economic crisis endangered the value of those assets. Still, the Asian banker of the USA continued to buy bonds of the American Government thus serving its own interest: the quickest recovery of the USA. China could not afford a loss in the dollar since it would lead to a decrease of the value of its reserves and to less power to sustain China’s vital exports.
If we consider the examples of China, Russia and India, we may think it is a good time for buying gold. Furthermore the evolution of global economy indicates the same thing. Thus the precious metal may become an object of interest for even more people. Some investors and collectors may even become more interested in gold coins such as Gold Sovereigns. Numismatists are especially interested in this type of gold coin. It also has a high premium to the gold price.
Source by Carol Medforth
Why Is China Buying So Much Gold?
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