China, the world's fourth-largest producer of gold, produced a record amount of the precious metal last year while profits at companies in the industry surged 51 per cent, according to the China Gold Association. The mainland produced 240.078 tonnes of gold last year, 7.15 per cent more than the year before, the association said. Gold produced from Chinese mines, as opposed to gold recovered from base metal smelting, rose 0.72 per cent to 179.848 tonnes. Shandong was still the largest gold-producing province, accounting for 25.03 per cent of the metal produced from Chinese mines. Henan ranked second, accounting for 13.74 per cent, followed by Fujian and Liaoning. Chinese gold producers posted a profit of 6.1 billion yuan last year, up 51.34 per cent, thanks to rising gold prices, the association said. Turnover increased 34.11 per cent to 52.9 billion yuan. Gold prices hit a 25-year high of US$730 an ounce in May and averaged US$604 an ounce last year, up 34 per cent from US$453 in 2005. Prices fell to a two-month low of US$600 an ounce at the start of this year, dampening Hong Kong-listed gold mining stocks. Shares in Zijin Mining Group and Lingbao Gold have fallen about 10 per cent so far this year. Still, precious metals consultant GFMS suggested that demand for gold would be supported by weaker prices and continued buying interest from India and China. HSBC recently raised this year's average gold price forecast to US$680 an ounce from US$660, with the weakening US dollar as the key driver. DBS Vickers forecast that it would rise to US$700 this year. The potential for an increase in geopolitical tensions would also be a supportive factor, James Steel, an analyst at HSBC said in a report.
