In 2011, China became the No. 1 importer of gold. China was already the world’s leading gold producer. The Asian juggernaut also reduced its holdings of US government securities last year for the first time since the Treasury began keeping the data in 2001. As of Dec. 31, China held $1.15 trillion in Treasuries, down from $1.16 trillion at the end of 2010.
This reduction doesn’t sound like much, but it’s the trend that’s telling: gold up, Treasuries down.
China is not only the biggest importer of gold, it is also the biggest miner of the precious metal. According to the World Gold Council, China produces nearly 50% more gold (about 300 tons per year) than the second-place country… Australia. Not a single ounce of that newly mined gold leaves the country. By law, the Chinese government buys every ounce of gold that surfaces from a Chinese mine shaft… no matter what.
Clearly, the Chinese are taking the “long view” when it comes to gold accumulation. They believe they can trust gold more than US Treasuries.
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