Mike Burnick: The debt-ceiling drama and government shutdown that has been playing out in the U.S. for the past few weeks is an absolute embarrassment. Americans, regardless of political persuasion, are shaking their heads in shame at the three-ring circus going on in Washington.
Overseas investors holding U.S. assets are also watching this nonsense, and they are voting with their wallets. Needless to say, it’s a vote of no-confidence. However, one asset class stands to benefit in the long term: gold.
But gold continues to be one of the worst-performing asset classes in 2013. And as my colleague Larry Edelson pointed out recently: Gold’s interim bear market is not over yet.
But as Larry also concedes: “There will soon come a time when it is prudent to load up on gold, but we’re not there yet.” Global investors who tend to take a longer-term view of gold see it as the ultimate asset class of choice to own in an era of lost confidence in paper currencies.
Dollar Assets in Jeopardy
Emerging markets investors, in particular, are losing confidence in dollar-denominated assets, especially bonds, as a direct result of Washington’s dysfunction. While some are sanguine about the debt-ceiling standoff, saying it won’t have a lasting impact, one of the largest holders of dollar-denominated assets, China, disagrees.
|China is on pace to import a record amount of gold this year.|
Just days ago, China’s official Xinhua News Agency said the threat of default is putting China’s dollar assets in “jeopardy” and called for a new international reserve currency to replace the dollar so international investors could avoid “intensifying domestic political turmoil” from the U.S.
China held $1.3 trillion worth of U.S. Treasury bonds at the end of July, so they’re right to be concerned about a potential default, or even deferred interest payments from the Treasury.
Who can blame them for diversifying their massive $3.5 trillion in foreign exchange reserves away from the dollar and into alternative assets? And China’s alternative of choice is gold.
The nation is already on pace this year to import a record amount of the yellow metal, partly due to increased consumer demand. But another reason is central bank buying. China imported 861.4 metric tons of gold through August 2013. That’s more than double the 361 tons it imported at the same time last year.(...)Click here to continue reading the original ETFDailyNews.com article: The Biggest Central Bank Gold Buying Spree Since 1964You are viewing an abbreviated republication of ETF Daily News content. You can find full ETF Daily News articles on (www.etfdailynews.com)
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