-->Quelle: Wealth Daily Profit Letter, by Luke Burgess:

BALTIMORE, MD -- Today China holds around $700 Billion in U.S. currency in its foreign-exchange reserves. But now, because of fears of a weakening greenback, China's National Bureau of Statistics wants the country to begin trading in its U.S. dollars for other major currencies.

Last week the U.S. dollar dropped against the euro and yen after the Commerce Department reported that the U.S. economy grew at an annual rate of only 2.5% in the second quarter.

Second quarter growth was well below most analysts expectations and is only half compared to the previous quarter's expansion of 5.6%.

On top of the fear of a slowing economy, investors are concerned that a weakening market may encourage the Fed to pause in its policy of steadily increasing interest rates thus putting further downward pressure on the greenback.

Things are bad for dollar bulls now and they only get worse...

The Chinese now hold the world's largest foreign-exchange reserve. Get this -- According to latest figures, the Chinese for-ex reserve has ballooned to an astonishing $941 Billion!

And it's still growing!

China has been increasing its foreign-exchange reserve by an average of $20 Billion each month this year. Take that to the bank!

China has been accumulating most of this in U.S. dollars. In fact, most estimates show that the U.S. dollar makes up 70% to 80% of China's of foreign-exchange reserves. That means the Chinese hold somewhere between $650 and $750 Billion in U.S. currency. That's enough bread to buy all of the outstanding shares of British Petroleum three times over...and still have a bit to spare.

But now -- over fears that the U.S. dollar is headed south -- China may be trading in their U.S. dollars for euros and yen.

Over the recent months China has been buying the greenback to prevent foreign-exchange inflows from boosting the yuan's value.

The nation wants to slow appreciation in the yuan, which has risen 1.5% since it was revalued a year ago, as it protects exporter profits.

But last week China's National Bureau of Statistics said the country should begin diversifying its foreign-exchange reserves in order to hedge itself against a falling U.S. dollar.

...Bad news for dollar bulls, but good for gold bugs...

In a statement posted on their website, the statistical bureau said,"The U.S. dollar may continue to weaken, increasing the risks of foreign-exchange losses in our currency reserves."

This diversification will undoubtedly put a severe downward pressure on the U.S. dollar and cause gold prices to increase.

As the nation gradually moves away from the U.S. dollar and into other currencies, Chinese economists are urging Beijing to significantly increase their gold reserves -- By four times!

As of today, China holds about 600 tons of the yellow metal in its reserves. This makes up about 1.3% of their total foreign-exchange reserves

But economists want to increase China's gold reserves so those reserves account for 3% to 5% of the foreign exchange reserves -- Or about 2,500 tons!

More gold reserves will help the Chinese government prevent risks and handle emergencies in case of future possible turbulence in the international political and economic situation.

It's difficult not to be bullish on gold right now. We should hold tight to our hard assets and continue buying mining stocks.