The last 10 years have seen a dramatic and steady rise in the price of gold, with an average of just over 17% per year. This precious metal is becoming more desirable as an investment, especially in wake of global economic problems. China is one country that has been particularly active in increasing its reserves. China is buying gold in record numbers, and currently they account for 23% of all purchasing in the world.
China is Buying Gold and Looking to Become Number One
Despite being the world’s largest producer of this precious metal, China is buying gold with the intent to become the number one purchaser in the world as well. The Chinese have been acquiring records amounts, adding up to 245 tons in 2010 and doubling to 490 tons in 2011. The new year is expected to show even larger increases.
The combination of this buying trend, an increase of production in the country and a ban on gold exports all add up to a rapidly growing stockpile. Most of this is being bought up by the Chinese Central Bank as they prepare for potential currency devaluation. Since the government deregulated prices and trading in 2002, the demand from the average citizen is increasing as well.
The people of China have the world’s highest savings rate, but are facing an economic downturn. Their stock market is questionable, the property market is crumbling and exports are slowing down. Coupled with the government looking at lowering required banking reserves, the threat of monetary devaluation is looming. This has produced a major shift to precious metals, both for investment purposes and as savings for their children.
The trend of China Buying Gold is being further fueled by the New Year. China has recently entered the Year of the Dragon and, auspiciously speaking, investments are supposed to do well this year. In addition, the Chinese New Year is always a traditional time to give gifts, and precious metals are very popular in this regard.
It is not just those in China that are looking at this as the safe investment, however. Most major central banks are attempting to grab up this precious metal and the majority of investment analysts approve the move. A growing distrust in tradition currencies and rising government debts around the world ensure that this trend will most likely continue for some time.