Chinese Begin Buying Up Gold

Wednesday, June 3, 2009 10:17 AM

By: Julie Crawshaw

Individual Chinese investors are now rushing to hoard the precious yellow metal, hoping it will retain value if the dollar collapses.

"The declining value of the dollar along with the worsening economic outlook is forcing investors to seek other anti-inflationary investment tools, like gold," Ping An securities analyst Xiao Zheng told The China Daily.

China is the world's second-largest gold consuming country. In late April, the People's Bank of China announced its gold reserves had risen 454 tons since 2003 to 1,054 tons, a signal that the central bank is taking gold as a reliable hedge against financial uncertainties as fears over the global recession deepen.

Analysts say they expect the Chinese government would continue to raise its gold holdings as the yuan becomes increasingly internationalized.

Chinese demand for gold bullion reached 68.9 tons in 2008, up 176 percent from 25 tons in 2007.

The World Gold Council's Gold Demand Trends report for the first quarter shows gold demand in China jumped to 114 tons in the first quarter.

"If I look at 10 years from now, I do believe that the purchasing power of the dollar is going to be substantially less,â€