Why Are the Chinese Buying Gold?

OK...this article in Forbes is incredibly interesting.  It seems that maybe things are quite so rosy fine in China... not as rosy as many PRO CHINA investment managers would have us believe.

Why?  Because it appears that Chinese citizens are buying gold...which is a hedge against bad things happening with the Chinese currency.

Why?  Because it appears that the Chinese who have money that they are converting to gold are starting to smell a big bubble that has already been cooked in China and that bubble may be getting ready to pop.

What will happen to the global economy if China falters while the rest of the globe is reliant on their growing economy leading us all through the desert and back to the promised land of prosperity?

Ummmm....if Greece falls, then Italy, Japan, Spain, and then China makes some big groaning noise....we better be looking to the sky...for our redemption is nigh.

Although indicators showed the Chinese economy faltered only at the end of September, there had been a growing sense of pessimism inside the country for months before then. Beijing, after all, could build only so many “ghost cities” before citizens began to notice. As Joseph Sternberg of the Wall Street Journal Asia said on the John Batchelor Show last Wednesday, “people inside China seem to be losing faith in the Chinese growth story that we’ve been hearing so much about for the past few years.” Estimates of capital flight are sketchy, but it appears there was $34 billion of it in the third quarter of last year and a $100 billion in the fourth.

Not every Chinese citizen is in the position to export cash, so the next best tactic for the nervous is to buy gold, a refuge from plunging property prices and declining stock markets as well as an anticipated depreciation of their currency.

The worst thing about capital flight and gold purchases is that they drain liquidity out of the Chinese economy just when it is needed most. Beijing can continue to work its magic as long as strict capital controls keep money inside the country. Once they fail to do so, however, all bets are off. The purchasing of gold, of course, results in the exporting of cash.

Chinese asset values have not yet crashed across the board, but the buying of gold—a leading indicator of panic—is an especially troubling sign that they will.

Here;  http://www.forbes.com/sites/gordonchang/2012/01/29/why-are-the-chinese-buying-record-quantities-of-gold/