It is highly anticipated that China will become the world’s largest net buyer of gold this year surpassing that of India, who has been the largest gold consumer until now. China’s gold purchases for 2012 have already risen ten percent according to ICBC a leading Chinese bank. Why are they so eager to buy?

China has held the world's largest amount of US debt, larger than any other nation. However things are drastically changing. China has changed its investment strategies, including moving out of a majority stake in dollar dominated assets and converting those assets into gold. It clearly doesn't take a financial genius to figure out the logic behind China's dollar exit strategy.

While the American dollar may still be king over an uncertain euro today, what will happen once the US is reminded that its debts levels in comparison exceed that of Greece? While still the largest owner of foreign dollar reserves China is clearly conscious about how over exposed their holding are, putting their nations reserves into a slump. Currently US Treasuries are inside the largest market bubble in history.

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