Below is an excerpt from the Market Watch article "China approves Gold Fund of Funds" (http://www.marketwatch.com/story/china-approves-gold-fund-of-funds-2010-11-30):
"China’s securities regulators have given the go ahead for a mutual fund to invest in foreign exchange-traded gold funds, potentially tapping interest among mainland China investors who face negative real interest rates on their bank deposits and want to hedge against inflation."
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Allowing Chinese investors access to foreign Gold ETFs is but one more way that China is encouraging its citizens to buy Gold.
I believe China is pushing its people towards Gold in an attempt to protect their buying power without undermining their export potential. After all, China's embrace of a weak currency policy, by linking the Yuan to the Dollar, is positive for Chinese exports, but dangerous for a Chinese economy that is becoming increasingly consumer driven. I believe China reasons, and rightly so, that if Chinese citizens keep their savings in Gold, China will be able to leave the Yuan's peg to the dollar in place for longer, without fear of destroying the Chinese people's purchasing power.
In any event, whatever China's impetus for stimulating Gold demand, news of this nature is very bullish for Gold. If you dont have a position in Gold, I would highly recommend taking one now.
Couldn't disagree more with your gold position. The west is going through a long deleveraging process, and this will have a deflationary bias.
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