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Worried About the Dollar, China Buys More Gold

September 10, 2009

By Andrew Freiburghouse | Money Rates Columnist

For those of us who watch for the best bank rates on CDs, savings accounts, and money market accounts, watching for changes in Chinese savings patterns is a must.

China has about one trillion dollars stashed in U.S. Treasury bonds, and hundreds of billions more in U.S. banks.

Concerned about high U.S. government spending, Chinese finance officials have put the word out that gold might be the best place to put some of the massive amount of money that the Chinese are saving every year.

Gold Prices Up Huge Over the Last Year

Anytime the U.S. government spends the kind of money it has spent over the last year, the value of gold is likely to rise, for gold is the traditional hedge against a lessening of the value of the dollar.

Sure enough, GLD, an index of gold-related stocks, has risen from $73 per share in September of 2008 to $98 per share in September of 2009.

Gold Supply Limited

Nevertheless, worries that Chinese savings will stop flowing into U.S. deposit instruments is probably overblown, for the simple reason that there is not enough gold to absorb that much savings.

But the Chinese are looking at silver and other commodities, too, as a way to achieve less dependence on the U.S. dollar.

Your responses to ‘Worried About the Dollar, China Buys More Gold’

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13 September 2009 at 1:04 pm

I tend to agree with this article. I think the dollar will continue to suffer against foreign currencies, especially with all the deficit spending.

I think you will see more investment dollars end up in the commodity sector in things like gold.

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