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Why is China buying gold?

If you follow gold prices you will be aware that China has recently started to buy a lot more gold.

Between the first quarter of 2009 and the first quarter of 2014, China’s central bank increased its gold reserves 75% to 1,054 tonnes.

Gold bugs, those folks who are waiting for the world’s financial Armageddon, saw it as a clear sign that the dollar was set to collapse, and that the price of gold would increase dramatically.That news got a lot of people hot under the collar. China’s decision to buy more gold was seen as a sign that it no longer had faith in the U.S. dollar or U.S. Treasuries.

In truth, the fact that China is buying more gold is a simply a matter of fiscal common sense.

China is a large holder of U.S. dollars and is also the largest single holder of U.S. Treasuries, with over a trillion dollars.

According to Li Lianzhong, who heads China’s economic department of the Party’s policy research office, “The U.S. is printing dollars on a massive scale, and in view of that trend, according to the laws of economics, there is no doubt that the dollar will fall. So gold should be a better choice.”

Buy buying gold the Chinese government is simply being cautious, responsible and covering its bets.

As an individual, you can follow the same course with the same logic.

Maybe the U.S. Dollar will make a dive. Maybe it won’t. Nobody knows. Plenty of people SAY they know, but they don’t.

However, to protect your own wealth, it simply makes sense to buy gold and spread both your risk and opportunity.

There is no need to panic and convert all your cash and investments into gold. But it does make sense to hold 10%, 20% or even 30% of your assets in gold.

For governments and individuals alike, gold continues to be a safe haven for wealth.