China and India, the two most populous countries on the planet, have both upped their gold-buying habits in the last few years, which has led to a decrease in the supply of gold on the market, an increase in the price of gold, and a lot of speculation as to why China and India are storing up on gold.
The story starts with China, who has exploded their gold inventory since 2002. As a matter of fact, as reported by Contrarian Profits, China’s gold holdings are currently somewhere in the neighborhood of 33.89 million ounces of gold. That’s an increase of 75% over the last 6 years. China is bulking their gold holdings up. But why?
Here are some reasons:
Why China is Buying Gold
China’s going bullish on gold because even a communist knows that when supply in something goes up, demand goes down — and the price almost always goes down. That goes for currency too. The world has issued more currency in the last 3 years than in the last decade before that. We’ve all seen the hockey stick graphs that show the explosion in debt, and the printing of money.
All the money printing is going to have consequences, and gold is being used as a hedge against inflation. And for good reason: while currencies can become completely worthless, this has never happened to gold in the history of mankind yet. Gold is the ultimate safe buy, because if you have a thousand ounces of gold, chances are you aren’t going to worry about how you’re getting lunch on the table — gold has never lost all of it’s value, something no other type of currency can brag about.
What This Means for Us
China is buying gold, along with the central banks and India. That means that the bull market isn’t yet dead and still has a lot of life in it. That also means that if any manipulation of the gold market is going to occur by the powers that be, it’s probably not going to be wiping out the big guys — they’re the once manipulating the market, after all.
That the central banks and China are all buying gold is yet another reason to be bullish on gold and silver. Of course, that doesn’t mean I think you should trade gold futures — that’s too risky, even for a lot of experts. This just means you should put your money toward gold coins and gold mining stocks. They’re your safest bets.
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