China's Gold Rush

China imported over 209 metric tons of gold in the first 10 months of 2010.

The U.S. has become an exporting nation once again. But this time, it's exporting inflation thanks to Bernanke and his QE1 and QE2.

China has tackled rising inflation by raising interest rates twice in the past few months. And it'll likely have to hike them again in the new year. If not, it can elevate its currency value—something the U.S. government has wanted for a while.

Also ironic is how the Federal Reserve's actions have unleashed other forces.

With inflation on the rise in China, the Chinese have developed into huge gold bugs. Previously, China's love affair with gold ended when the communists took over in 1949. The new rulers declared the metal bourgeois and assumed control of all gold mines. But now it has re-emerged as a popular hedge against inflation and currency appreciation.

More than likely, the Fed didn't intend for that to happen as it plotted and schemed.

Chinese inflation data for November showed prices up 5.1% from the previous year, the sharpest increase since July 2008.

Combined, rising inflation and low Chinese interest rates often turn bank deposit returns into the red in real terms. Chinese households keep about $2 trillion in such accounts, with few other options to store cash.

The U.S. government wants China to become a bigger importer. And it looks like it got its wish as Chinese gold imports soared in 2010.

Already the world's biggest gold mining country, China has now turned into a major buyer. It imported over 209 metric tons of gold during the first 10 months of the year. . .a fivefold increase from the estimated 45 metric tons in 2009.