President Obama's trip to China has helped to heighten speculation about the renminbi and the issue of currency appreciation. While Obama's recent references to a greater balance in trade have been met by stiff opposition from China's officials, a recent report from the People's Bank of China suggests that appreciation of the yuan is not out of the question.

The best way to play this potential appreciation is through ownership of alternative assets, such as gold, rather than directly owning China's currency. Hedge fund manager Hugh Hendry speculated that the rise in oil in 2008 was a result of the rise in the yuan because the oil bubble popped right when the yuan stopped rising.

As the yuan slowly appreciated, the Chinese were able to do the carry trade with U.S. dollars. Once the appreciation stopped, the speculators exited and oil plunged.

Oil was the focus of 2008, but in 2009, gold has the attention of investors and is the better play. And as with oil previously, traders already have implemented the "dollar down, gold up" strategy. Even if the Chinese do not increase purchases of gold, other investors will buy as the dollar weakens.

Bullion ETFs such as

SPDR Gold Shares

(GLD) - Get Report

and

iShares Comex Gold

(IAU) - Get Report

, and stock ETFs such as

Market Vectors Gold Miners

(GDX) - Get Report

and

Market Vectors Junior Gold Miners

(GDXJ) - Get Report

are a good way to play these alternative assets.

For less risk, use a more diversified approach via ETFs such as

Market Vectors Hard Asset Producers

(HAP) - Get Report

.

Appreciation of the yuan would lead to further pressure on the dollar. Thus far, investors have been able to turn to the

PowerShares DB U.S. Dollar Bearish Fund

(UDN) - Get Report

to benefit from the dollar slide.

UDN, however, may not benefit much from China currency appreciation, because a stronger yuan could take some pressure off the euro. The euro makes up 57% of the Dollar Index that UDN tracks.

While the

WisdomTree Dreyfus Chinese Yuan

(CYB) - Get Report

would also seem like an obvious play here, investors will make more money by figuring out what the Chinese would buy with appreciated currency rather than by buying the currency itself.

In the People's Bank of China's third-quarter report, the bank changed its language regarding the exchange rate and many took it to mean that the government may allow the renminbi to appreciate. The 46-page report states that: "Following the principles of initiative, controllability and gradualism, with reference to international capital flows and changes in major currencies, we will improve the yuan exchange-rate formation mechanism."

China's policy-makers are slow to move, and the country's leaders will likely wait until the opportunity feels right to let the currency appreciate. Mounting pressure from the EU, U.S, IMF and World Bank, however, underscored by Obama's recent visit, will keep more investors' eyes glued to the yuan.

While timing the appreciation of the yuan will be difficult, the best way for investors to play this shift is with alternative asset ETFs like GLD. Investors in emerging markets such as China and India have been turning to gold as a currency alternative. Soaring gold prices, economic fears and potential yuan appreciation should continue to fuel gold ETFs.

At the time of publication, Dion was long UDN, IAU, GDX and GDXJ.

Don Dion is president and founder of

Dion Money Management

, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.

Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.