Fear of a dollar collapse will make the Chinese the biggest buyers of gold this year
By: Peter Cooper
Thursday, 14 June 2012
China is widely expected to overtake India as the world’s biggest consumer of gold this year with gold purchases rising by 10 per cent, according to the leading Chinese bank ICBC. Why?
The Chinese are moving out of the dollar and into gold. That is what a seemingly ill-educated gold trader in the Sharjah Gold Souk told us earlier this year.
King for a day
You don’t need to be a genius to see the logic behind this move. The dollar might be king today but only against the faltering euro. But what happens when we are reminded that US debts are running at levels comparable with Greece?
As the largest holder of foreign dollar reserves the Chinese are only too painfully aware of how exposed this leaves their savings in a slump. US treasuries are the biggest bubble in history as legendary investment adviser Dr Marc Faber reminded us recently (click here).
Diversification for protection really means something if you have most of your wealth tied up in US t-bonds. And where do you go for safety? Things have already gotten so bad for the Swiss franc that it has become pegged to the euro to stop further appreciation.
Then again if you are Indian and with your money in gold and not rupees then you are laughing. The massive depreciation of the rupee puts gold at a fresh all-time high in rupees, even while it is several hundred dollars off its dollar-denominated high of last September. This experience is not lost on the Chinese.