China Can't Get Enough Gold

Gold has had a rough year, but it doesn't mean all investors have shunned the precious metal. Demand for gold has rocketed in China. But what does this mean for investors in the United States?

Investors can get gold exposure through ETFs including the SPDR Gold Shares ETF (NYSEMKT: GLD  ) and the iShares Gold Trust (NYSEMKT: IAU  ) , but know the risks involved with investing in this space. In the following video, analysts Mike Klesta and Dan Caplinger discuss the lay of the land for gold and when the metal makes sense for a portfolio. 

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  • Report this Comment On February 23, 2014, at 2:17 PM, MrRand wrote:

    China in all likelyhood, is planning to reset their currency to the gold standard. They are just waiting for the right time. The American dollar is in trouble.

  • Report this Comment On February 23, 2014, at 7:18 PM, luckyagain wrote:

    "China Can't Get Enough Gold"

    This is happening because the Chinese government control the exchange rate between their currency and all other currencies. If the Chinese were to allow their currency exchange rate to be set by the market instead, this would not happen. Most experts agree that the Chinese currency exchange rate is about 40% too low and this is the reason that China has a huge trade surplus. China is practicing an economic policy called mercantilism that seeks to maximize exports and minimize imports. So ordinary Chinese citizens buy as much gold as they can because that is their way of offsetting the Chinese government control of their currency.

    The idea that the Chinese government would want to base their currency on gold is absurd. Once that happened, Chinese industry would lose their major advantage of selling cheap goods.

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Mike Klesta

Mike works on the Media team for The Motley Fool. He joined the Fool after spending a number of years as an ink-stained editor before getting the investing itch.

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