While we already know $750 is no magic number below which gold cannot fall or below which it cannot loiter, I take no small comfort in the fact that there is a clear increase in demand at that price. In time, as the dollar continues to participate in the fiat currency race to the bottom, that number will ratchet higher and higher still.

Maybe not overnight, but in the next six months to a year, certainly… or as certain as anyone can be about anything these days.

One thing that could get the show on the road – pronto-like – has to do with the continuing presence of the other 900-pound gorilla in the room: Foreign dollar holders.

[A Money Morning investigative analysis back in September demonstrated the muscle these overseas-dollar holders have, by showing how they forced the U.S. government to step in and take control of foundering mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE).]

Those foreign-dollar holders are at work in the gold market, as well. For proof, just look at China. Like their Saudi counterparts, Chinese investors have at their disposal a lot of greenbacks. Actually, not just a lot, but enough to remake the Great Wall, for China’s currency reserves are currently estimated at $2 trillion.

China’s investors face the same worries that we face. They’re watching the daily financial news and are realizing that this crisis is getting much, much worse. With that realization comes the desire to add gold their holdings.

On that front, here’s some news from Hong Kong…

(The Standard, Hong Kong. Nov. 14):  The mainland is seriously considering a plan to diversify more of its massive foreign-exchange reserves into gold, a person familiar with the situation told The Standard. 

Beijing is considering changing its asset allocations during the financial tsunami in order to build up gold reserves "in a big way," the source said. 

China’s fears about the long-term viability of parking most of its reserves in U.S. government bonds were triggered by Treasury Secretary Henry Paulson’s US$700 billion (HK$5.46 trillion) bailout plan, which may make the U.S. budget deficit balloon to well over US$1 trillion this fiscal year. 

The U.S. government will fund the bailout by printing new money or issuing huge amounts of new debt, either of which will put severe pressure on the value of the greenback and on government bond yields.

The United States holds 8,133.5 tonnes of gold reserves valued at US$188.23 billion. China holds gold reserves of just 600 tonnes, worth only US$13.89 billion. 

Beijing’s reserves could easily go up to 3,000 to 4,000 tonnes, Tanrich Futures senior vice president Colleen Chow Yin-shan said.

In another article from Bloomberg News, the head of China’s gold association commented that he thought China could triple its reserves. The Bloomberg report featured this quote.

China has the world’s biggest foreign-exchange reserves at $1.9 trillion, according to data compiled by Bloomberg. It is also the largest overseas holder of Treasuries after Japan. China’s demand for gold jumped 23%  in 2007, making it the world’s second-largest consumer. 

The Asian nation may buy more gold for its reserves on concern the $700 billion U.S. bank bailout will cause declines in the dollar and Treasuries, The Standard newspaper in Hong Kong reported today, citing an unidentified person.

In the final analysis, we can’t say with certainty what path gold will take between now and the time this crisis is over. But until I can see some tangible evidence that it has lost its value as money, I’m a happy holder and – at less than $750 an ounce – a buyer.