Why China Needs to Buy More Gold

Posted by Adam Sharp - Friday, June 10th, 2011

This list shows how countries stack up in terms of gold reserves.

world gold holdings

As you can see, only 1.6% of China's foreign reserve holdings are in gold. They still hold over a trillion is in US debt. But they're actively working on diversifying that "overweight" asset allocation, as over any extended period its value has dropped.

Back in April, I wrote about how some analysts say China may spend up to $1 trillion of their foreign reserves:

China has been moving away from the dollar, and into alternative stores of wealth for years now.

But $1 trillion into gold? If it happens, such a large move would further threaten the dollar's status as reserve currency. It would also provide further buying pressure in gold for years to come (as the dollar crumples into a pitiful heap on the floor).

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