Should You Accumulate Gold Like China?

According to reports on Chinese imports of gold from Hong Kong, the People’s Republic is on track to import more gold bullion in 2012 than the entire official holdings of the ECB.  What does it mean for us, fellow taxpayer?  Our guest contributor Brad Evans, who is writing on behalf of BullionVault, explores this economic trend and possible implications for your portfolio in the following insightful editorial.  Enjoy and stay fresh!

Should You Accumulate Gold Like China?

In recent years, much has been written and speculated about the idea of Chinese authorities buying up massive amounts of gold bullion.  Indeed, the amount of gold going to China has increased notably over the course of the past few years, and it certainly seems as if the country is making a concerted effort to accumulate a great deal of the precious metal resource.  Is this just a passing trend, representative of independent economic movements, or a greater strategy with implications for the worldwide economy?  Ultimately that remains to be seen, but one result of China’s accumulation of gold bullion is clear.

With many of the world’s dominant economies located in the United States and the Euro zone, the U.S. and countries that use the Euro generally prefer to keep the cost of gold low, if possible, so as to avoid the strengthening of the resource against their respective currencies.  As things stand now, and have for some time, the U.S. dollar and the Euro are generally seen as popular reserve currencies, meaning that people in other economic zones frequently turn to the U.S. dollar and the Euro as the ultimate safe haven.  As long as the price of gold remains relatively low, the dollar and Euro remain strong as reserve currencies.  Therefore, it is plain to see why China buying up massive amounts of gold bullion may lead to an unwanted shift in gold prices that could take the focus away from the reserve currency status that U.S. dollar and Euro enjoy.

Perhaps more important for many people is how this economic strategy of China’s could affect your finances.  World economic trends will come and go, and economies will strengthen and weaken accordingly – but can you benefit from buying up gold bullion in your personal life, on a smaller scale, in the same way that China hopes to benefit in the long run internationally?  While you certainly can’t hope to influence any worldwide economic trends on your own – accumulating gold bullion may not be a bad strategy to consider if you feel that the price of gold will be rising relative to other assets in the coming years.

Buying gold bullion is simple enough.  You just need to head to a precious metal trading site such a s BullionVault, where you can buy and sell gold as you please according to constantly updated world prices.  These sites also offer you various convenient and secure storage options, meaning that if you want to you can easily accumulate a great deal of gold bullion.  However, before making this or any investment decision it is important to formulate a sound investment strategy.  For example, if you are looking for short-term stability or gains, gold investment may be risky at the moment, as the dollar is strengthening and gold may be weakening.  But for long-term gains, this may be a strategy worth considering.

This has been a guest post on behalf of BullionVault, written by freelancer Brad Evans.