In an effort to engage the Chinese consumer base, the Chinese government has announced that it will try to push silver and gold investment.  The news comes on the heels of other announcements made this summer regarding the US dollar and a possible new world reserve currency.  Perhaps China is trying to ignite the investment fires to motivate its citizens to invest more on an individual basis.  Another potential motivation comes to mind however, one that has potential for worldwide impact and change.

If the Chinese begin to make gold and silver investing easy for the average Chinese consumer, that would open the market up to about 500 million more consumers who, previously did not have easy access to these marketplaces.  That means that with more demand, in fact almost 30% more demand, the price of precious metals could slowly begin to float upwards.  I wouldn’t expect this upward movement to occur quickly, more like over a period of five to ten years, but this increased demand would have very certain, and very interesting results.

Another motivation behind the Chinese government’s decision to make gold and silver more accessible as investment vehicles for the masses may lie in the idea that US debts currently held by China, in the form of bonds and other paper vehicles, are devalued currently.  If China begins to build up a massive store of gold and silver, they may in fact be able to eventually run the US dollar out of the position of world’s reserve currency.  The Chinese could back their currency, or a new currency of their choosing with gold or silver, and set their own price for a gold to US dollar conversion of toxic US currency assets.  This would create an environment more conducive to getting out of the longer-term US bonds that China is wrapped up in currently.

For the Chinese government, there is more to the creation of new precious metals investors that just motivating its citizens to invest for the future.  The very flow of capital and the world economic reserve currency could be under a slow, methodical, and very calculated attack.  Since China has met with relatively low success in trying to pry the US dollar out of its position of reserve currency of the world’s economy, they may be doing so in a much less visible, obvious, and intrusive way.

Only time will tell if the Chinese truly intend to push the US dollar out of the reserve currency realm or not.  The Chinese government is planning on issuing gold and silver “debit cards” which can be used to buy and sell the metals in real time, at banks and kiosks around the country.  This would allow the average investor to trade precious metals in a commission-free, unconstrained, real-time market environment.  This begs another question- why don’t we have something similar in the US on a large scale?  Sure there are pool and custodial accounts, but neither of those are truly commission-free and available to the masses.  It would seem as though it would be in the US government’s best interests to begin to allow the average consumer to buy-up precious metals.  Especially if China’s attempts to do so represent a slow but steady attack on the US dollar’s position as the world’s reserve currency.