China Dwarfs India in Gold Demand

IN 2009, China will overtake India as the world’s largest gold consumer.

Let me tell you some history about the gold history in China. Since 1949, Gold hoarding was forbidden by China when the communists took power. So the Chinese people could not buy a gold.

But now they have removed this restriction. So that Chinese people can freely buy gold and invest in other precious metals like silver. Not only this but china is also motivating their people to buy gold.

Logical Explanation -

Well, let me tell you that why china is doing this? Why china is motivating their people to buy more and more Gold? Well, this is because China does not have any more faith in US Dollar. China has world’s largest foreign exchange reserve worth $ 2.27 Trillion held in the form of US Treasury Bonds.

But since last 2-3 years, US Government is printing money like anything. In just last 2 years, US government has increased it’s monetary base (Dollars in Circulation) from $ 800 Billion to almost $ 2 Trillion. This means that because of this printing activity of US Federal Government, the purchasing power of the existing dollars is getting diluted. And that’s why the value of $ 2.27 Trillion held by China is also diluting.

This is the reason why china now wants to invest in gold.

Total Gold demand in china 2009 for jewellery and investment was expected to reach 432 tonnes compared with 422 tonne from India. In 2008, India imported 713 tonnes of Gold.

China now has cut the import tax on jewellery and allowed selected commercial banks to sell gold bars in a move to boost demand. Gold is now traded freely at world price on Shanghai Gold Exchange and permission from the central bank is no longer required to operate as gold jewellery manufactures…