The industry talks a lot about how much gold China buys, though not how much the nation produces and consumes. China leads the ranks for gold production and retail consumption across the globe. Despite its middle-class status, people across China purchase gold at high levels each year because of its cultural status and ability to store value during periods of economic turmoil.
During the first nine months of 2023, China produced 271.248 tons of gold. This total reflected a 0.47% or 1.262-ton increase from the January-to-September period last year.
China’s gold production typically comes from the Eastern provinces of Henan, Liaoning, Fujian, and Shandong. By country, China was the largest gold producer in the world in 2022, accounting for 10% of all gold produced worldwide.
During 2022, China produced 375 tons of gold. Given 2023’s output for the first nine months and the 0.47% increase from last year, we could be on track to see another similar output level this year. China will likely top the global ranks for 2023 again unless another major mine ramps up production.
2022’s output rates reflected a 6% increase from the year prior as well. Clearly, China continues increasing production to match growing demand rates each year.
The Shaxi Copper Mine is China’s biggest gold mine. Despite its name implying that it only produces copper, the mine produced 958.74 thousand ounces of gold last year. Other major mines with large outputs in China include the Sanshandao Gold Mine, Dexing Mine, CSH Gold Mine, and Xincheng Gold Mine.
China’s unmined gold reserves run deep and seem to continue growing with frequent discoveries. China has maintained its status as the largest gold producer since 2007, after overtaking South Africa’s title. The nation contains 3,389 gold mining areas operated by over 400 mining companies.
“China’s reserves of unmined gold are deep and growing. By the end of 2017, the country had identified gold resources and reserves of 13,195.60 tonnes (t),” the World Gold Council explained in a report. “Technological breakthroughs have also paved the way for deep prospecting, delivering further increases in reserves.”
So why does China continue producing so much gold? Let’s shift to its recent consumption trends.
During the first nine months of 2023, gold consumption in China totaled 835.07 tons, reflecting a 7.32% increase from the same period last year. This data comes from the China Gold Association.
One of the biggest sectors pushing this rise was investor demand. Consumption rates for gold bars and coins in China surged by an impressive 15.98% from the same nine-month period last year to a total of 222.37 tons.
Gold jewelry consumption in China also increased this year by 5.72% when compared to the same nine-month period during 2022. 2023’s jewelry consumption total reached 552.04 tons.
The only sector that dropped in terms of consumption rates was industrial demand and other uses. Industrial consumption rates fell by 5.53% compared to the same period last year to 60.66 tons. The large surge in investor and retail consumption made up for this decrease, ensuring the overall consumption level remained positive.
Gold-backed exchange-traded funds also gained support, particularly during the third quarter when consumption increased by 9.53 tons. This increase brought the total holdings for gold ETFs in China to 59.69 tons by the end of the nine-month period.
All data points to China increasing its production and consumption during the first nine months of this year despite the numerous economic challenges the nation faced during recent months. As we enter the final quarter of the year, analysts expect that China’s consumption levels will only increase at a more rapid rate ahead of the holiday season.
“Despite challenges, an improved outlook for China’s economy could provide some support for local gold demand. Also, various jewelry fairs and industry events may spur both manufacturers’ and retailers’ replenishing demand. Furthermore, with the National Day Holiday and Mid-Autumn Festival approaching, retailers’ inventory restocking is likely to continue,” the World Gold Council explained in its August report.
If production increases at a steady level, but demand and consumption rates spike ahead, local gold prices could rise above international levels, just as they have numerous times this year. Only around a month ago, China achieved a record high for its local premiums at over $120 per ounce. If such occurs again, we could see China providing excellent pricing support to the greater gold industry.
As always, investors should consult their advisors before making any portfolio decisions.
