With the gold flirting with $1,600 per ounce again, and the gold bugs arguing that a weaker dollar will push gold above $2,000 and beyond in 2011, what's the prudent stance for the typical U.S. investor?

Should you started dumping your dollar-denominated assets?

Well, here's one take on the dollar, and on the U.S. investment climate generally: China's take.

Despite a weaker dollar, despite a sluggish U.S. economy and high unemployment, and despite comparatively low interest rates on U.S. Treasuries, China remained the largest holder of U.S. Government debt  at the end of May, with $1.16 trillion, and it also increased its holdings by $7.3 billion during that month, according to U.S. Treasury Department data.

In a statement, China's State Administration of Foreign Exchange (SAFE) said its holding of U.S. reservese will be dynamically adjusted according to market conditions.

SAFE added that while diversification will continue to be one of the principles for managing the nation's reserves, the strategy won't be on based on short-term market movements.

Dollar/Investment Analysis: Food for thought for investors. Unless you're an expert in the foreign exchange, and know how to time your dollar-denominated or euro-denominated assets perfectly, it doesn't make a great deal of investment sense to try to 'time the market' regarding the dollar's value.

But don't fret about your dollar-denominated assets: China isn't, and they are world's largest foreign holder of dollar reserves.