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The gold market may be obsessed about the dollar and prospect of a rise in US interest rates. But there’s another factor looming on the horizon: a fall in gold mine supply.

After rising every year since 2008 global gold supply plateaued last year, according to the World Gold Council. In China, the world’s biggest producer, it fell by a record 9 per cent, the second time output has fallen in the country since 1980.

China accounts for about 15 per cent of the world’s gold production, a higher proportion than Saudi Arabia has in the oil market. But since 2016 authorities have tightened their scrutiny on gold mining, which has led to the closure of smaller mines in the country.

“The environment is gaining increasing appreciation from policymakers,” Alistair Hewitt, head of market intelligence at the World Gold Council, said. “Gold mining has come under tighter regulations.”

China produced an estimated 420.5 tonnes of gold last year, according to the World Gold Council. Over the same period, Chinese demand for gold rose by 4 per cent to 953.3 tonnes, it said.

Global gold production rose to 3,268.7 tonnes in 2017 from 3,263 tonnes a year earlier, according to the WGC. That was the smallest increase since 2008, when gold mined fell more than 2 per cent during the financial crisis.

The price of gold has risen 15 per cent since the beginning of 2017 to trade at $1,334.78 a troy ounce.

Almost all of China’s gold goes to meet domestic demand, since companies are not allowed to export gold.

As regulations tighten at home, China’s gold companies are increasingly looking to make overseas acquisitions. Last year Shandong Gold agreed to buy 50 per cent of Barrick Gold’s Veladero mine in Argentina for $960m.

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