China's gold mines could be exhausted in as little as six years as the country’s demand for the precious metal doubles, according to a report from the World Gold Council.
The report also predicted that China's gold mines would not keep pace with demand and could even be exhausted within six years.
During the last decade, Chinese gold mining producers have stepped up production by 84 percent. The country’s known gold reserves account for just 4 percent of total known global gold reserves, The U.K. Telegraph reports.
China doubling its gold holdings would mean an annual gold demand of about $29 billion at 2009 prices, said the WGC’s Marcus Grubb.
During the past five years, China's demand for gold has increased at an average rate of 13 percent per annum. Chinese gold consumption was worth more than $14 billion in 2009, or about 11 percent of global gold demand.
However, the WGC noted that Chinese "consumption intensity" lagged substantially behind other major markets, and though China is the world's sixth largest official holder of gold, its gold reserves currently accounted for less than 2 percent of total reserves, which was "low" by international standards.
Gold for June delivery, the most actively traded futures contract, on the London Metal Exchange touched a high of $1,114.20 an ounce and is currently trading at $1,128.53.
RBS Global Banking & Markets analyst Daniel Major said while he sees the $1,100 an ounce level providing strong near-term support, in the longer run, the metal may struggle to maintain such prices.
"Longer term, we think we will see further dollar strength, and we are going into a seasonally weaker period for jewelry demand, as well as a period that is likely to be less supportive from the investment sector," he told Reuters.
Further interest rate rises, after Australia's decision to lift rates overnight, may also raise the opportunity cost of holding gold, he added. "The risks are to the downside in terms of the gold price," he said.
Strength in the dollar curbs gold's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.
© 2017 Newsmax Finance. All rights reserved.