Why governments are buying gold

Wednesday, May 25, 2011
By Paul Martin

By Aaron Rowe

A lot of questions are swirling the globe today about why governments are buying gold bullion and what this means when it comes to the US dollar? Should Americans be running to their nearest gold dealer and buying what they can because the end is near? Or is buying gold, or maybe silver and other precious metals, a wise choice as an investment?

In the first quarter of 2011, the Mexican government had amassed nearly 100 tones of gold bullion causing metal experts to turn their heads and take notice. Mexico has not been the only country to build up its reserves of the precious metal. China, India, Russia, Kuwait, Saudi Arabia, all have added gold to their coffers. Why are they doing this? What does gold give them that other investments do not?

There is more to this story than the idea that countries are buying gold to prepare for an impending collapse of the US dollar. Global economics is far too complicated for a one-sided scenario such as this one. Countries like Mexico, China and others are developing and buying gold to diversify their exports to developed markets like the United States and Canada.

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