It looks like China, already the world’s largest gold producer, is also buying all the Western Gold that it can get its hands on, having imported over 114 tons in December – a record. ZeroHedge observes that once again, the price of gold dropped precipitously in December as liquidations took place to meet margin calls, and the Chinese were more than happy to take up the slack.
In 2012, China imported a whopping 834 tons of gold, nearly twice the gold that it imported in 2011. To put that number in perspective, Japan’s total official gold holdings are at 765 tons, while Russia holds 938 tons. China’s goal in 2009 was to achieve upwards of 6,000 tons of gold by 2014. While official estimates from the IMF put current Chinese gold holdings at 1,000 tons, the real number is more likely triple or quadruple that, with many speculating that China unofficially holds upwards of 4,000 tons today.
Should U.S. Investors Buy Gold?
It is barely speculation at this point that China intends to continue buying up as much gold as it can to ultimately introduce a gold-backed currency, which will supplant the U.S. dollar as the worlds reserve currency.
U.S. investors price gold in dollars, so should the dollar lose its reserve currency status and continues to decline, the price of gold in U.S. Dollars will ultimately rise. While it may not be the case on any given day, the price of gold generally follows an inverse correlation to the U.S. dollar over time.
China is clearly taking advantage of temporary fluctuations in the market and is draining gold from the West as fast as it seemingly can. U.S. investors with available cash may wish to do the same – as a hedge against ongoing declines in the dollar.
Of course, individual investors won’t be buying tons of gold in large bar format like China, but physical gold for small investors is available in as little as 1/10 of an ounce as official U.S. Mint gold coinage. One ounce gold coins and bars are very popular too. First-time investors in physical gold can start by viewing PMBull’s guide to buying gold to get an idea of what the best gold to buy will be for them.