, IncChina registered a record output of nearly 314 tons of gold in 2009, marking the third year that the giant nation has spent as the world’s leading gold producer. This record Chinese production could have the effect of increasing gold prices; additional gold reserves allow more of the vast demand for this precious metal to be met, compensating for sagging output from other countries and raising prices as increasing demand is better met.
China’s production increased nearly 19% from 2008, with its top ten mining companies contributing over 47% of that figure. China has been streamlining its gold mining industry, with many small and inefficient producers being closed or integrated. For this reason, the number of producers in China fell from 1,200 in 2002 to about 700 today.
Contrary to conventional thinking, an increase in gold production could have a positive effect on gold prices. Although increased supply can sometimes lower value, gold has a demand that far exceeds any increase in supply; in fact, gold prices may rise because consumers won’t have to rely on more expensive metals such as palladium or platinum for jewelry or electronics applications.
With gold prices correcting and appearing to be ready for a rally, now is a very good time to consider purchasing bullion or certified coins. Additional supply will likely increase demand, possibly leading to higher prices for the metal. Investors who take positions early have a good chance to catch the gold price near its bottom and profit most when a rally takes place. With a record Chinese production in 2009, there is potential for strong gold prices in 2010.
Ronald Stevens
Senior Staff Writer - GoldPrice.net
