Gold price surge as Chinese miners flee amid crisis
The price of gold plunged Tuesday after Chinese mining giant Geely warned of a “significant” threat to the world’s biggest precious metal supply.
Geely warned in a note to investors that Chinese miners had fled the country after discovering gold in the South China Sea.
The gold price, which is the world gold standard, fell to $1,237.24 an ounce in early trading after a surge of about $30 per ounce since early Wednesday morning.
China’s state-run Xinhua news agency cited the Chinese government’s National Bureau of Statistics as saying about 10,000 miners fled the southern port of Tianjin in the first week of the crisis, which was exacerbated by an increase in heavy machinery traffic.
Analysts said the move could be a signal that China is preparing to respond to a shortage of precious metals by sending troops to the South East Asian nation.
“It could signal a response to a crisis by the Chinese authorities to get to grips with the supply of precious metal,” said Josh Faucher, senior fellow at the Center for Strategic and International Studies.
A government spokesman, Hong Lei, said Wednesday that the government is “working with the companies to ensure that the supply chain is protected and to find a solution to the problem.”
The government has no immediate plans to deploy troops to China to support the mining sector.
“The government said it will issue an order to the companies and the government-owned mining company, Xinhua, to return the gold.
On Wednesday, Chinese authorities said they have arrested 10 people and seized a truck carrying gold at a port in Qingdao in Guangdong province.
Authorities have said the gold was found in the waters around Dongping, where about 1,000 Chinese workers live and the mining firm is based.
The gold was seized as part of a massive investigation into the company, according to Xinhua.
Xinhua reported that some people have been detained for two days for illegally transporting gold.
The gold crisis came amid a sharp drop in global stocks and a sharp rise in the price of crude oil, which rose to a record $75.49 per barrel on Wednesday.
Facing a severe shortage of gold, China is trying to ramp up its use of iron ore, which accounts for a fifth of the world economy.
Gold is the most abundant metal in the world, but the world is running out of it.
Experts said the crisis could also affect other commodities that were once the primary focus of mining.
The U.S. Commodities Futures Trading Commission said on Wednesday that global oil prices have fallen from $107 per barrel in June to $62 per barrel Wednesday, after falling to a near record low of $56.77 a barrel on Monday.