In 2007, South Africa fell from its longheld position as top gold producing country in the world, being replaced by China. This may lead some to believe that gold mining output in China is increasing, but this is not the case. China's output actually peaked in 2005 and has been falling since then. The reason that China overtook South Africa's number one position is that South Africa's output is declining faster than China's.
China's decline in mining output follows a worldwide trend of declining production. The global decline is a delayed result of the extremely low price of gold in the late 1990s and early 2000s. This low price of gold meant that gold exploration and development of new mines was no longer affordable and operations were scaled back to only managing current mines. But because it takes more than 10 years to locate, extract, and put gold onto the market, we are now in the middle of a production decline resulting from the gold price of that period.
If the gold price remains high, there will likely be new exploration and gold discovery in China, but this is not yet in progress, and whenever the process begins, there will be a 10+ year delay in increased output. And according to mining industry reports, China's current gold deposits will be depleted within the next 6-14 years. Ren Guangzhi, manager of investment for Zijin Mining Group, China's mines will run out of gold by 2014 unless new discoveries are made. If this is the case, and if new exploration is starting around the present time, then that means that by the time new mines are operational in 2019 or later, China will have been without any gold output for 5 years. This could mean a serious decline in the gold supply. If we look at the more optimistic view of the Metals Economics Group in New York, then China's current deposits can continue to be mined for around 14 more years. That means that if new exploration is begun soon, then new mines may be operational around the time that the current mines are exhausted. But that's IF exploration begins soon, and even in this optimistic scenario there would still probably be a slowdown in gold output as gold ore dwindles.
With the world's top gold producer's output in decline, the gold supply will likely become even tighter in the coming years. The current global economic recession and subsequent investor demand for gold as a safe-haven has hit just as gold mines have gone into their cyclical decline. The combination of these two factors will likely drive the gold market price much higher than it already is.
Source: Bullion Vault: Gold News