Investing In Gold And Silver For Capital Preservation And Appreciation

What Determines China To Buy So Much Gold?

The rarity of gold has made it a precious metal for people. It has been bought and sold all along the path of history. However, with the appearance of strong American and European currencies, the dollar and the euro, gold devaluated. It has become the third most popular holding in the world. Then the latest economic recession hit America. Nevertheless, the American dollar has managed to maintain its place on top of the list of most stable currencies. Still, there is a constant danger for all paper currencies, including the dollar. It is inflation. This loss of value of currencies however has no power over gold. The economic evolution does not influence its tangible value. Moreover the precious metal is sometimes used to combat inflation.


The rarity of gold has made it a precious metal for people. It has been bought and sold all along the path of history. However, with the appearance of strong American and European currencies, the dollar and the euro, gold devaluated. It has become the third most popular holding in the world. Then the latest economic recession hit America. Nevertheless, the American dollar has managed to maintain its place on top of the list of most stable currencies. Still, there is a constant danger for all paper currencies, including the dollar. It is inflation. This loss of value of currencies however has no power over gold. The economic evolution does not influence its tangible value. Moreover the precious metal is sometimes used to combat inflation.

All countries having important paper currencies reserves feared for their loss of value when the economic crisis stroke. This is why many central banks around the world started to invest in gold. In this respect, the most “hard-working” three states were Russia, China and India. Russia has invested constantly in gold in the last years. The country even bought the precious metal extracted from its own mines. Why would anyone do such a thing? Because gold provides prestige and it is also a valuable asset and an important tool in the fight against inflation.

The Chinese Government probably felt the same about gold when they decided to buy precious metal “made in China”. Country’s representatives decided not to discuss publicly about those acquisitions. Still, 2009 was the year when China chose to reveal that the country has increased its gold reserves with 76 per cent since 2003. Quite an impressive number, some might say. In case you wonder why China decided to keep its hunger for gold secret, the answer is simple. The country is the Asian banker of the USA. It holds a large amount of American treasuries. Its massive investments in gold represent only around 1.5 per cent of its total reserves.

At the moment of the economic recession, China had already purchased a large amount of US Government bonds. Consequently, these reserves became endangered. China had to intervene and help America out of the recession. Therefore, the Asian banker of the USA bought even more US Government bonds. A loss in the American dollar could have had serious consequences on China’s economy as well: the value of the Asian country’s reserves would have been diminished while its vital exports could not have been supported by a weakened America anymore.

If we think that China, Russia and India have certainly had their reasons to buy so much gold we may feel tempted to do the same. The evolution of world economy also shows it is the right time to buy gold. More and more people might notice it too and their interest towards the precious metal might increase. Investors and coin collectors may even see gold coins such as Gold Sovereigns more attractive. Numismatists already prefer this type of coins, which add a high premium to the gold price.

A great investing opportunity for both coin collectors and investors is the Gold Sovereign coins, traditionally engraved and made of 22 carat metal.

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