The United States 
currently holds the title of largest gold reserves in the world. The reserves are held in two places: the Federal Reserve Bank of New York’s vault, followed by The United States Bullion Depository, Fort Knox. There is another nation gaining on the United States as the largest gold holder. Over the decades China has been buying up a lot of gold at a rapid rate. The prediction that China will continue to want to purchase gold has helped gold prices.
Some investors have theorized that there is a huge amount of unaccounted for gold in the market that has found a place in China. Some believe that China is secretly buying this gold which has caused its increase in demand there. In China gold is still highly valued because of the monetary security it offers. Another reason for this is because China has always held extremely strong control over gold trade.
China is not required to be transparent about its gold stores, and it would not make sense for it to be because that would bring up the price of gold. The reason China wants to buy up so much gold is that it may give it a more solid footing if world currency changes happen, or even make the Yuan a contender to replace the dollar as the world’s reserve currency. It wants to buy gold for the same reasons most people do: in the case of an inflation, gold is a safe investment.
The more gold a nation has, the more sovereign it becomes if there is a sudden world event that takes out the U.S. Dollar or the Euro. In fact, all banks around the world have been quietly stockpiling gold for a few years now in anticipation of the U.S. Dollar continuing to have a change in status and wanting to protect themselves. If China continues to do this it will make its Gold to GDP ratio similar to that of the U.S.
Some people counter this theory with the fact that they aren’t seeing gold prices hike up to an extreme. Even though some say our economy is improving, we are still in massive debt which is accompanied by inflation. The federal government has stimulated the economy which looks good and makes us continue to spend frivolously, but if they stopped there would be currency devaluation and the price of gold would rise. That in combination with the fact that gold production has declined and central banks from around the world are all stockpiling gold in anticipation of this, you can see that China is playing the long game as far as their currency and reaping the benefits of investing in gold.
