China Fears Gold Boosts Over Dollar
China has held the world’s largest amount of US debt, larger than any other nation. However, things are drastically changing. China has changed its investment strategies, including moving out of a majority stake in dollar-dominated assets and converting those assets into gold. It doesn’t take a financial genius to figure out the logic behind China’s dollar exit strategy.
While the American dollar may still be king over an uncertain euro today, what will happen once the US is reminded that its debt levels in comparison exceed that of Greece? While still, the largest owner of foreign dollar reserves China is conscious about how overexposed their holding are, putting its national reserves into a slump. Currently, US Treasuries are inside the largest market bubble in history.
Protecting one’s assets is important, as in diversifying; however, should the bulk of your assets be tied up in US Treasuries? Where else can one run to safety? Swiss francs used to be an excellent hedging investment. However the franc today is pegged to the euro to stop or slow its appreciation because things have wildly gotten out of control.
If you happen to be from India and are holding your wealth in gold instead of rupees, then you’re the one laughing. Due to the massive depreciation of the Indian rupee, gold is at record highs when measured against it. Even though it’s several hundred dollars below its dollar-denominated high, set back in the last quarter of 2011. The Chinese have also gained from these prices.
There are only a few true haven assets remaining in the world today. There’s an ever-increasing amount of financial market manipulations going on through central banks all over the world. This is because the central banks have the utmost control over the global supply of paper money. Gold and silver prices are also capable of being manipulated and suppressed by direct involvement from the bullion banks through conspiracy tactics.
However as physical demand for precious metals grows, on a global scale the manipulations will further ease, and then finally come to an end. Because the manipulators eventually won’t be capable of holding up against the pressure of massive physical precious metals being held outside their control. Thus the global manipulations and the entities behind them will implode.
Envision the US economy and what it would resemble, should its base rate be set to the same 6 percent level Italy has. The values within asset classes ranging from stocks, bonds, or real estate would all be annihilated. At that point, a dangerous deflationary depression would come about. However, no one presently takes a serious look into this situation, a scenario that really could happen. Global economies have sat in wait; on life-support since the global financial crisis began. While requiring further life support as economies continue to fail.
The Chinese smartly and systematically have been stacking gold and silver into their government coffers with the vision that tomorrow will bring forth a severe economic event. Today they are buying physical gold and silver that acts as an insurance policy, against the worst-case scenario, the economic ills of tomorrow.
The seriousness of the mishandled eurozone sovereign debt crisis is a catastrophic problem today. It could be viewed as the best-case scenario for other nations and people to learn from and see where futures may eventually go. America is not far behind Europe, actually there in worse shape, soon the U.S. will be in similar but greater trouble. Follow China’s footsteps; invest in precious metals today to ensure your wealth tomorrow.