#ChinaGoldDiscovery put into perspective.
Multiple reliable reports, China discovered a massive undersea gold deposit, but the size is being widely misunderstood.
- The discovery was made off the coast of Laizhou City in Yantai, Shandong Province
- Described as Asia's largest undersea gold deposit.
- 3,900 tonnes = 8.6 million pounds = 3,9 million kilograms = 125,4million troy oz = $560 billion $USDC at $4470/oz if all was mined and ready to enter circulation.
- However we must put this into perspective as this is not newly mined gold, it's underground, not on the market. This distinction is everything.
- Gold$XAU prices move based on supply that reaches the market, not supply that exists in the ground.
- A discovery, even a huge one does NOT immediately increase supply
MINING UNDER THE OCEAN IS:
1. Extremely slow
2. Extremely expensive
3. Technologically difficult
4. Environmentally regulated
5. Years (often decades) away from full extraction
- So the market treats discoveries as long-term potential, NOT short-term supply shocks
WHAT THE DISCOVERY MEANS FOR GOLD PRICES
1. Short term (0-3 years): No price impact.
- No new gold enters the market from this discovery.
- Prices are driven by:
* Interest rates
* inflation expectations
* central bank buying
* Geopolitical risk
* Currency strength
-A discovery doesn't change any of these.
2. Medium term (3-10 years): Minimal impact
- Even if mining begins, the output will be tiny relative to global demand
* Global gold demand is 4,700 tonnes per year.
* China mines 377 tonnes per year
- So even if the new deposit adds 20 - 40 tonnes per year, that's:
* less than 1% of global supply
* easily absorbed by investment and jewelry demand.
3. Long term (10-30 years): Slight downward pressure.
- If China successfully extracts a large portion of the deposit, it could:
* increase global supply modestly
* reduce China's need to import gold
* strengthen China's strategic gold reserves
- But even then, the effect is small compared to global demand
