New Gold In China
By: Owen Higley
Just before the start of 2025, a massive discovery was made in China’s Hunan Province. In late November, 2024 a “supergiant” gold ore deposit was uncovered beneath an already existing gold mine in China, which has the possibility of being the largest deposit of the precious metal in the world. Within the newly uncovered deposit is an estimated 1,100 tonnes of gold, which in total scores a price tag of nearly $83 billion. The reason for such alarm with this discovery is that gold is a much more scarce resource than many people are aware of. Prior to this discovery, the world's mined supply of gold was roughly large enough to fill 3.5 olympic sized swimming pools (212,000 metric tonnes). Moreover, if the amount of gold held in the world was divided equally amongst our population of 8 billion people, every individual would receive about six standard sized gold rings worth, maybe not as much as you envisioned. While this new gold deposit discovery isn’t proportionally relevant to the world’s supply of gold pre-discovery, the deposit in the Hunan Province is 7.3% larger than the previous record holder for the largest gold deposit ever, the South Deep gold mine in South Africa, and 36.14% larger than the second largest deposit ever found with Indonesia’s Grasberg gold mine. To say that such a large discovery of gold this late in history comes at a surprise would be an understatement with entities such as mining technology and geological mapping having never been more advanced. Gold is likely the most well known and popularly monitored commodity around the globe due to its inflation repelling store of value and historical significance. The metal commodity had already been experiencing sharp price increases at previously unseen levels since the start of 2024, growing over 31% from the end of February to November 21 (the day the deposit discovery was made public) and had been continuously setting new record prices week after week. With such a large audience watching the precious metal commodity, what does news of the Chinese discovery mean for commodity prices and investor outlook?
As previously mentioned, much of what makes gold such a popular investment is its stability in value during times of uncertainty. Gold is commonly used in diversified investment portfolios to mitigate some elements of risk and to act as a safety net in case of economic fluctuations causing unforeseen volatility in the U.S. dollar and interest rates. Being said, it’s important to note that a weak dollar, increasing the likelihood of interest rate hikes, are beneficial for the commodity and its safety net presence. However, after the recent election and the inauguration of Donald Trump the idea of a weak dollar and interest rate increases don’t seem likely with Trump’s notoriously favorable position on tariff implementation. A publication from Yale University’s “Budget Lab” puts it best by stating: Instillation of more tariffs reduce the number of imports into the United States which as a byproduct means less U.S. demand for foreign currency. Moreover, because “tariff retaliation” from other countries is not an occurrence the demand for the U.S. dollar remains unchanged, meaning that relative to other currencies the value of the dollar increases. Continuing on, according to a Wall Street Journal article published on November 15, 2024 by Joseph Hoppe, the combination of these factors set gold on track for its worst weekly decline in over three years (at the time of publication). While at the time, the future looked bleak for gold, China’s discovery bringing with it increased geopolitical tension and notice from the global gold market may have been just enough to combat the negative pressures of a stronger dollar and interest rate decreases.
China is the world's largest gold producer accounting for about 10% of global gold output, and demands even more of the resource than it is able to produce. With such a demand paired with a sizable utilization of the resource, the discovery of the deposit within China means that a large portion of the resources will stay within the nation's borders for domestic use. This in turn will create a geopolitically tense situation of relative scarcity around the globe, causing forecasts to show increasing gold prices.
The preceding is exactly what happened, just days after gold was set to have its worst weekly performance in years, on November 15, by November 22 gold prices were over $2,700 which at the time was nearing a new record price. Now, in February of 2025 gold is inching closer to the $3,000 marker, growing closer day by day, hosting a 52 week high price of $2,974 on February 20. Futures contracts for the resource for as soon as October 2025 are valued over the $3,000 marker suggesting that it’s not unlikely we will see the gold achieve “gold” and reach the milestone over the course of this calendar year.
