My hypothesis is that China is buying gold among other commodities in response to perceived inflation risk. Already there is a second bubble in China, but they cannot raise interest rate because upon doing so would trigger more inflow of capital seeking higher interest rate (relative to the 0% rate in the #1 and #2 world economies). Tighter requirements on margin would trigger a second round of panic selling. Therefore they need other methods of hedging inflation. That is why they are buying and stock piling commodities. The only people that buy gold are central banks and jewelers and some coin collectors.