Will China Gold Demand Quadruple Gold Price?

It wasn't long ago that China Gold demand was dominating gold news stories.Under cover of darkness they secretly doubled their gold reserves.Then reports surfaced that they were encouraging their own citizens to buy gold.Speculators and gold bugs began to froth a bit as the prospect of huge new demand from China contributed to the rise in gold prices.

Some said, China was intent on selling dollar assets to buy gold - that China was no longer interested in holding dollars in the face of our own credit crisis.Others speculated that China would buy all the gold the IMF would sell and then some.And still others, I among them, reported on China's encouragement of its citizens to own gold to protect against an uncertain global economic condition.

Then came a short stream of comments that shut us all up.China expressed confidence in the dollar indicating they were not so concerned as to sell off any of their enormous dollar holdings.With respect to gold, China almost expressed a disinterest, as though gold was good but not so good that it has to buy buy buy and do it quickly.

I speculate now that China had no other choice than to play down their insatiable appetite for gold.One false move of accumulating gold, per all the predictions of us experts, and the price of gold could rocket to the moon.Such an act would greatly inhibit China's ability to accumulate gold at today's bargain prices, so a new strategy had to be implemented.

Here's my theory.While China has not resorted to selling off dollar assets, many reports suggest they have quit buying them.Reserves are still growing, just not dollar reserves. As compared to total reserves the percentage of reserves held in dollars is said to be shrinking. They have also stepped up their own gold production and to insure none of the gold they produce themselves leaves the country, they passed laws prohibiting its export.And finally, their investment into gold mines around the world has stepped up.Why buy the milk when you own your own cow?

Is China still buying gold on the open market when they get a chance?We may not know until after the fact.Is China trying to monopolize the world gold supply?One report today suggests yes.It even suggests China's actions could help drive gold to $5,000 an ounce.

Don't be surprised if more news of China's intent to corner the gold market begins to surface.One thing is for certain.Gold continues to edge higher but you get a sense that something big and dramatic is brewing out there.

Again I say, don't buy gold to get rich.Own gold as a hedge against inflation, uncertainty, unmanageable debt and as a preserver of wealth.I'll be watching this closely just to give you one more reason to keep visiting.