Worried About the Dollar, China Buys More Gold
September 10, 2009
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.