On June 11th, affected by the decline in gold and silver prices, Hong Kong and A-share gold stocks fell collectively. Among them, Zhaojin Mining fell by more than 10%, Shandong Gold, Lingbao Gold fell by more than 6%, and Zijin Mining fell by 5.71%.

In the A-share market, Beijing Xiaocheng Technology and Chifeng Jilong Gold both fell by more than 8%, Yintai Gold and Sichuan Gold both fell by more than 6%, Western Region Gold fell by more than 5%, and Shandong Gold, Zhongjin Gold, and Hunan Gold all fell by more than 4%.

On the news front, the United States announced better-than-expected employment data last Friday, and the US dollar index strengthened, causing gold and silver prices to decline. Last Friday, London Gold fell sharply by 3.45% to $2,293.51, while London Silver fell sharply by 6.86% to $29.17. The US dollar index rose to 105.3904 at one point on Monday, hitting a new high since May 14th.

Gold prices took a significant dive.

During the Dragon Boat Festival holiday, there was a substantial drop in international gold prices, immediately attracting widespread attention.

The major factors affecting this market downturn were the better-than-expected US non-farm employment data and China's central bank suspending its purchase of gold.

US May non-farm employment data exceeded expectations with employment increasing.

Last Friday, data from the US Department of Labor showed that employment increased by 272,000 people in May, far exceeding market expectations, with the main driver being the growth in the service industry. The unemployment rate rose to 4% in May, the first time since January 2022, higher than market expectations of 3.9%.

This better-than-expected data also led the market to generally believe that the Fed's plan to cut interest rates could be further postponed. The Federal Open Market Committee is expected to make no adjustments at this week's policy meeting, but the market currently expects the Fed to cut interest rates by 50 basis points by the end of December, most likely for the first time in September.

The People's Bank of China has suspended its purchase of gold.

According to data released by the State Administration of Foreign Exchange on June 7th, China's gold reserves were 72.8 million ounces as of the end of May 2024, unchanged from the end of April.

It is worth noting that since November 2022, gold reserves have increased for 18 consecutive months, with a total scale of 10.16 million ounces.

Regarding the reasons for the suspension of gold buying, a certain brokerage analyst said,The Central Bank's move was 'expected and understandable'.

Contrary to popular belief, there are certain considerations and performance indicators for the operation of foreign exchange reserves, in a nutshell, to enable foreign exchange to continue to produce returns, and cannot lose to inflation. After the rare increase in international gold prices in March and April, the investment return and risk of the Central Bank's expensive purchase of gold are now relatively poor. Therefore, the Central Bank chose to suspend purchases.

World Gold Council: Global gold production capacity may have peaked.

According to a report by the US CNBC television station, the World Gold Council recently stated that the global gold mining industry will find it difficult to continue to increase production. Data shows that global gold production increased by 2.7% in 2021 and is expected to increase by 1.35% in 2022, but only increased by 0.5% last year.

John Reade, chief market strategist at the World Gold Council, said that we have seen year-on-year growth of 4% in mining output in the first quarter of 2024. But from a broader perspective, I believe that mining output reached a stable level around 2016 and 2018, and we have not seen any growth since then.

I think the most important situation is that since around 2008, the gold mining industry has experienced 10 years of rapid growth, and is now struggling to maintain a sustained increase in output.

At the same time,It is becoming more and more difficult to find gold, obtain gold permits, and finance gold. Reade explained that new gold mines are becoming increasingly difficult to find worldwide due to many prospective areas having already been explored.

The World Gold Council pointed out that large-scale gold mining is capital-intensive, requiring a lot of exploration and development, and takes an average of 10 to 20 years to be put into production.

During the exploration process, the possibility of developing a discovered gold mine into an actual mine is also low, with only about 10% of gold mines worldwide discovered to contain enough metal for mining. So far, about 187,000 tons of gold have been mined, with most coming from China, South Africa, and Australia. According to the US Geological Survey estimate, the amount of gold that can be mined is about 57,000 tons.

In addition to exploration, government permits are also becoming increasingly difficult to obtain and may take more time to pass, making mining more difficult. It may take several years for a mining company to obtain the licenses and permits necessary to begin operations.

In addition, many mining projects are located in remote areas that require additional infrastructure development, such as roads, electrical utilities, and water, which increases the cost of building these mines and financing their operations.