The Little Book of the Shrinking Dollar: What You Can Do to Protect Your Money Now

“Biggest Central Bank Gold Rush in 40 Years?”

That’s a recent headline screaming out from the front page of the Financial Times. Central banks, you see, were buying up during the September correction, putting them on track to buy more gold in 2011 than at any time since Bretton Woods fell apart 40 years ago. The World Gold Council predicted around 450 tons would change hands.

Who’s buying the most? Russia snapped up 15 tons in 2011. Thailand bought 20 tons. Bolivia added 15 tons to its stash. Kazakhstan and Tajikistan also added to their gold piles. It marks the first time in a generation that central bank gold holdings expanded. Emerging markets, you see, really want to catch up and hold at least 2 to 8 percent of their reserves in gold.

Really, as strategist and CNBC regular Michael Pento put it, the only “enemies” of gold are “rising interest rates and a balanced budget.” And these are things we won’t be seeing in the West anytime soon. Smaller central banks have every reason to hedge up happily on gold.

Who might really step up purchases at every correction? China may invest more than $1 trillion in bullion, Pento says, “China wants to be an international player, and they need to own more gold than they currently have.”

As of six months ago, China held only 1.8 percent of its total reserves in gold, Russia 8.7 percent, and India 9.5 percent. They have a lot of catching up to do. And they’re ready, willing, and able to do it.

In the United States, the figure is 76.5 percent, ...