With the US dollar value dropping and national debt of the US increasing every second, many countries are now considering to go back to the old days when gold was the monetary standard.  Over the past year, China has been vocal in order to adopt a new reserve currency replacing the US dollar. This would destroy America, because losing the global reserve currency status would undermine its standing in the international community and its ability to create wealth out of thin air. Currently, China is actively promoting its yuan as international currency.

As many countries are looking to diversify their holdings to protect themselves from the slumping dollar, India has made a big leap to do so. The Reserve Bank of India bought 200 metric tons of gold from the International Monetary Fund (IMF) last Tuesday, causing the price of gold to surge. This is exactly 50% of 400 tons of gold that the IMF announced in September that it would sell in order to raise money to shore up capital. In total, the IMF holds about 3,217 tons of that precious metal, making it the third largest official holder of gold after the US and Germany.

The top 10 holders of gold in the world are:

Gold prices have been up 23% this year alone and as the gold and the US dollar goes in perfectly negative correlation, the increase of gold price is only proof that the US dollar value has slumped. The fact that India bought half of the gold that the IMF announced to sell, was surprising. This only shows that other countries’ central banks are looking into buying gold as well to diversify their holding. As a matter of fact, there are many analysts who expect China to be also a significant buyer after India. The Russian central bank has also expressed interest in expanding its gold hoard.

The gold price right now is rising because it reacts to the sentiment that more and more central banks of other countries may possibly opt to drive out the dollar and move into a safe-haven gold as the dollar weakens further. Many countries do not have much confidence in the US dollar anymore and they believe with the US debt growing, gold prices are going to go even higher.

“Despite the prevailing high price level, central banks from emerging economies are still willing to accumulate gold to diversify their currency reserves,” Eugen Weinberg, a senior analyst with Commerzbank AG, wrote in a note. “Investors who had previously given gold the cold shoulder are now returning to the market on the news of India’s gold purchase.”

Analysts have said that the price of gold will double in the next 3 years. If this happens, it would mean that the US economy would not be any better from today.

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