The solid demand for gold is not supported just by private individuals and panicky investors, but countries like China, India and Russia are ramping up investment in the yellow metal.
... that the world's biggest and fastest growing national economies are in the midst of an historic push to build up their stores of the precious metal, according to Wealth Daily's Luke Burgess.
Today, the biggest buyers of gold aren't private citizens or hedge-funds. Instead, nations like China, India, and Russia have moved forward to grab up every loose ounce of the metal..., Burgess says.
There have been reports that the Chinese are buying gold assets to cover against rising inflation risk and global macroeconomic uncertainties. Beijing has long complained that the U.S. Federal Reserve's policy of Quantitative Easing (QE) results in exporting America’s inflation to China. Hence the propensity to hedge against the runaway costs in the domestic market by stacking up gold assets.
Going by the rate at which China is expanding its gold assets, it will soon outstrip the United States as the biggest holder of gold. Currently, the U.S. is at the number one spot with 8,133 tons of gold.
China — the biggest gold market of them all — has stated an intention to raise their national reserves by 849%, or 10,000 tons, worth an estimated half a trillion U.S. dollars, by the end of the decade, according to Burgess.
China is also intent on diversify from dollar-based currency reserves and focus more on gold servers. This makes sense considering that China ranks pretty low in a list of countries with gold-backed reserves. What is really happening is that Chinese are buying gold on an institutional level to hedge away from the dollar and build in diversification, Seeking Alpha quoted Investment Strategist Keith Fitz-Gerald as saying.
Demand from China and India accounted for a whopping 41 percent of the total global demand increase last year. Russia and India have not fallen much behind China in the gold chase. Russia's central bank bought two thirds of the country's entire national production in 2010 while India purchased about 750 tons of gold last year.
It is expected that Chinese demand for gold investments could spike to the tune of 40 to 50 percent this year. The Chinese gold rush is also aimed at preventing a fatal overhearing of the country's housing sector. The government has unleashed a variety of policies to prevent a housing bubble, which it fears would set off a massive economic collapse and the onset of social unrest.
China is well on its way to creating a Chinese version of the Fort Knox, according to Burgess. Fort Knox army post is where the U.S. Treasury has maintained the Bullion Depository, which is supposed to be biggest reserve of physical gold in the world.