Gold supply dilution ahead as China uncovers an $87 billion reserve – What’s next?

Hunan Academy of Geology discovered what could be more than 1,000 tons of gold reserves in China, which could dilute the precious metal world’s supply by over $87 billion, leading to questions on its financial impacts.

The group found 40 gold ore veins, resulting in 300 tons of gold discovered in the core exploration area. Chinese geologists forecast over 1,000 tons of gold reserves in the underground, as Reuters reported according to Xinhua news.

Notably, these estimated reserves were worth nearly $83 billion, or 600 billion yuan, by Reuter’s reporting time on Thursday. As of this writing, gold’s price has surged to over $87 million per ton, resulting in $87.67 billion reserve.

Experts consider all the potentially extractable amounts as “gold reserves.” Currently, the U.S. Geological Survey reports approximately 244,000 metric tons of gold discovered worldwide.

Gold price analysis amid potential supply dilution

With that, finance experts have signaled a potential supply dilution for the yellow metal as these reserves enter the markets. While the extraction will happen gradually, preventing any massive price crashes, these recently discovered reserves in China can still affect previous gold price forecasts.

Essentially, the 1,000 potential tons of gold would increase the precious metal’s supply by approximately 0.41%. This is a significant increase for a commodity mostly used as a financial hedge and for speculative purposes.

Interestingly, there is still a lower supply increase than the annual inflation of Bitcoin (BTC), currently at around 0.82%. Bitcoin’s supply inflation comes from the coin’s issuance from mining, generating an average of 450 BTC daily since April 2024.

This explains why the commodity’s CFDs continued surging last week despite the recent discovery of 1,000 tons of gold. According to TradingView’s index, gold was trading at $2,715 by Friday, November 22, up 2.40% from the news.

In particular, Goldman Sachs forecast the precious metal to reach 3,000 per ounce by 2025, as Finbold reported.

Nevertheless, more than the effects on gold’s price, as some Bitcoin advocates have focused on X this weekend, commodity experts are concerned about the increasing Chinese domination of the world’s gold reserves in times of macroeconomic uncertainties and US recession fears.

Featured image from Shutterstock.