China is buying up thousands of tonnes of gold. Should you keep gold bullion at home?

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Now China is pushing into the gold market in a big way. The reasons why are unclear, and gold continues to spawn more conspiracy theories than the moon landing, but what is known is that China has been amassing the yellow metal at a rapid pace over the last decade. Its official reserves are 1,658 tonnes as of July 2015, a small part of its overall currency reserves and far below the US’s hoard of 8,000 tonnes. Germany and the IMF have 3,000 tonnes apiece.

But China’s actual stocks could be closer to 4,000 tonnes, according to estimates based on how much it mines, imports, and stores. That would put it in second place behind the US. Given the opacity of statistics from China, it’s plausible the country has more.

Why would China keep it secret? Because openly accumulating in a relatively small market would drive the gold price up. And China is not the only buyer either. Russia and a number of other nations have been expanding their reserves too.

One possible reason for amassing a stockpile is that China recognizes the world’s monetary system is effectively based on gold – a shadow gold standard if you will. That’s the argument put forward by author James Rickards in his book The New Case for Gold.

If the monetary system collapses, “gold functions like a pile of poker chips” when the world’s powerful (most gold laden) countries sit around the table and formulate a new system. “China is trying to acquire enough gold so that when the international monetary collapse comes and the world has to recut the deal, China will have a prime seat at the table,” he adds.

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If there is a collapse of the global money system coming, what is the safest store of wealth for private citizens?

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