A gold deposit worth more than $80 billion has been discovered under China. The Asian country has been the largest producer of the precious metal since 2007. Global markets reacted immediately to the news.
Reuters reports that the deposit, discovered in Pingjiang County in Hunan Province, is located at a depth of more than 2,000 meters. According to preliminary estimates, the reserves amount to 300.2 tons, but according to geologists, up to 1,000 tons may be hidden in the layers below 3,000 meters. This discovery could have a significant impact on both international gold prices and the Chinese economy.
China’s role in the gold market
According to data from the World Gold Council, China accounted for approximately 10% of the world’s gold production in 2023, but domestic consumption far exceeds production. In the first three quarters of the year, the country consumed 741,732 tons of gold, while production was only 268,068 tons. This means that China relies heavily on gold imports to meet its domestic demand. If the newly discovered gold can be extracted economically, it could significantly reduce the country’s dependence on imports and strengthen China’s role in in the global gold market.
How did the gold price react?
The price of gold has already shown a significant rise this year, partly due to global geopolitical tensions. The price of gold futures on the Shanghai Futures Exchange reached an all-time high of 639.48 yuan/gram at the end of October. Since the beginning of the year the price of gold increased by more than 30%.
The Chinese discovery is unlikely to affect prices significantly in the short term, as it takes a long time to start production and enter the market cycle. The gold market continues to be dominated by factors such as inflation, the dollar exchange rate, and geopolitical events such as Ukraine war or the Conflicts in the Middle East.
Nevertheless, there has been a 3% decline in recent days, possibly related to the discovery of the Chinese gold deposit.
Gold rate between November 26, 2023 and November 26, 2024. Source: TradingView.
However, in the longer term, an increase in supply may moderate the rise in exchange rates, especially if global demand does not grow at the same rate. The deposit’s gold content (138 grams/ton) and significant reserves make the location attractive to mining companies, but the extraction of deep-lying ores can pose significant technological and financial challenges.
Bitcoin vs Gold Comparison
These kinds of discoveries highlight the unique nature of the gold market. The importance of physical gold reserves has not diminished over the centuries, but digital assets such as Bitcoin have become an increasingly attractive alternative for modern investors. One of the biggest advantages of Bitcoin is that its supply is strictly limited: there are only 21 million in existence, so no new “deposits” can be discovered that would affect its price. This kind of stability and decentralization makes cryptocurrency attractive, especially during periods of uncertainty in traditional markets.
While gold mining requires complex logistical and industrial infrastructure, Bitcoin mining requires only computer resources. This not only makes the process faster, but also, in some aspects, more democratic, since anyone can participate in it. However, bitcoin’s volatility and regulatory uncertainties continue to challenge the market.
What will the future bring?
The discovery of the Chinese gold deposit opens a new perspective on the international gold market. Although the extraction of reserves may take years and require significant investment, the country can gain an economic and strategic advantage by securing its internal gold supply. The discovery also highlights the differences between traditional and modern assets such as gold and Bitcoin. While gold is a symbol of centuries-old traditions and stability, bitcoin represents the future of digitization and innovation.
The evolution of the gold price in the coming months will continue to depend on geopolitical events, the global economic outlook and the exchange rate of the dollar. At the same time, China’s discovery reminds the world that commodity markets are still crucial to the functioning of the global economy.
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