Because they know what's coming...

Buying Gold: Why Are The Chinese Gobbling Up Gold Like There Is No Tomorrow?

Why are the Chinese buying so much gold? In 2010 it has been demand out of China that has been one of the primary factors for the dramatic rise in the price of gold. Gold is up approximately 26 percent this year, and most analysts expect it to go even higher in 2011. So is China buying gold at a breathtaking pace because they view it as a good investment, or are there other factors at work here? Do the Chinese view gold as a hedge against inflation? Is China seeking to get out of U.S. Treasuries? Has gold simply become much more attractive than paper currencies such as the euro and the U.S. dollar? Or could China be preparing for the coming financial collapse that so many economists see coming? It is always difficult to tell exactly what China is up to, but one thing is for sure - they are buying gold like there is no tomorrow.

Well, there seem to be four primary theories for why China is buying up so much gold right now.

#1 A Hedge Against Inflation

Already we are starting to see some very serious inflation in China. In particular, food inflation threatens to spiral out of control. In an inflationary environment, gold is always a good investment.

#2 An Alternative To U.S. Treasuries

Over the past decade, China has invested very, very heavily in U.S. Treasuries. In fact, the U.S. government owes China nearly a trillion dollars at this point. However, over the last year or two China has dramatically slowed down their purchases of U.S. Treasuries and they have been actively seeking out alternative investments. Gold has always been a very safe investment, and with the world financial system so unstable right now it makes a lot of sense to invest in gold.

#3 A Lack Of Faith In Paper Currencies

Over the past decade, China has accumulated a gigantic pile of foreign exchange reserves, but lately paper currencies such as the euro and the U.S. dollar have become increasingly unstable. The European sovereign debt crisis threatens to collapse the euro at any moment. Quantitative easing 2 and the tax cut deal that Barack Obama and the Republicans are trying to push through Congress are causing the rest of the globe to lose a tremendous amount of faith in the U.S. dollar. In this type of environment, holding paper currencies has become much less attractive.

#4 Preparing For The Coming Financial Collapse

It doesn't take a genius to figure out that we are living in the greatest debt bubble in the history of the world and that at some point the world financial system is going to crash. When that happens, the safest place to be will be in precious metals and other commodities. The Chinese have been busy gobbling up gold, silver and many other commodities, and so whether they mean to or not, they are positioning themselves to weather the coming financial storm better than most other nations.

Link:
http://endoftheamericandream.com/archives/buying-gold-why-are-the-chinese-gobbling-up-gold-like-there-is-no-tomorrow