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Thursday, November 17, 2011

Buying Gold - The New Chinese Trend

By Jack Wogan

Until recently the Chinese government did not allow its citizens to own gold. Everything was strictly controlled like in the case of all communist countries. In spite of that, the leaders took a new approach in the past years which actually encouraged the population to invest massively in the precious metal. In fact, all the people are advised to buy gold and to invest everything they have in the yellow metal. If in some regions people do not have access to things such as electricity, television or internet, they do know they have to purchase gold and spend whatever they have on buying it.

The entire financial world started to wonder how this could be possible. The most possible explanation could be that owning paper money is no longer wise. It is a known fact these days that only owning hard assets such as gold can be the only solution towards preserving the wealth of the population. The fact that the government advised people to purchase the precious metal led to an increase in its price at the global level. Shifts like this one are probably the most powerful things that can influence the worth of hard assets.

The quantity of gold owned by the nation and by the citizens is in strict correlation with the power of the national currency. Some say that the Chinese government took this new approach as a way to make its currency stronger but also to weaken that of the US. This could be justified by the fact that China and the US are constantly struggling for supremacy.

With a powerful currency, China can affect the other currencies of the world. How can buying gold influence that? First of all the gold reserves in the central bank are known to have the purpose of a store of value. This implies that the depositors can receive guarantees and that the currency can be secured. In spite of the fact that currencies do not have intrinsic value, whenever they are minted the government has to secure their value with something valuable in itself like gold. This is why, with more gold in the central bank reserves, the Yuan is very powerful.

The Chinese government purchases gold also because this precious metal is the best way to secure international transactions. This country is known for its massive investments in the regions affected by the recessions where the governments can no longer pay back the debts. With large amounts of gold owned in the central banks, the Chinese government can secure all its international transactions.

China is not the only country that set a new standard in buying gold. Many other governments advised the population to invest in this precious metal too. In fact, gold news reveals that this metal is very popular these days and many investors consider it to secure their wealth.

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