China created paper money and paper money then created inflation..Asian nations,China and India in particular, have a long history with gold. Precious metals as a hedge against chaos is deeply embedded in Asian cultures and when chaos takes the form of inflation, gold is the default hedge; and, today, inflation is on the rise.
China raised interest rates for the third time since mid-October ahead of a report forecast to show inflation accelerated to the fastest pace in 30 months. - February 8, 2011, Bloomberg News
This has profound implications for the price of gold. As inflation continues to increase, the buying of physical gold by the Chinese will send the price of gold skyrocketing. In fact, it has already begun.
On February 2nd, the Financial Times reported: Fears of inflation have also driven demand for gold as a retail investment… Precious metals traders in London and Hong Kong said on Wednesday they were stunned by the strength of Chinese buying in the past month. “The demand is unbelievable. The size of the orders is enormous,” said one senior banker, who estimated that China had imported about 200 tonnes in three months.