Record gold prices boost jewelry recycling

Record high gold prices are weighing on overall demand but driving recycling of the precious metal, with people ditching their jewelry to take advantage of the high prices.

“Historically, there is a close relationship between the price of gold and recycling, because when prices rise, people tend to sell their products to take advantage of the high price levels,” Krish Gopaul, an analyst at the World Gold Council, told AFP. Gold.

According to the World Gold Council (WGC), mining production typically accounts for around 75% of the world's supply of the yellow metal each year. The rest of the supply is secured through recycling.

Since the beginning of the year, the price of the precious metal has risen more than 13% to reach the all-time high of $2,431.52 on April 12, driven by expectations of a drop in American interest rates that makes the dollar less attractive. .

The growing geopolitical tensions with the war in Ukraine and that between Israel and Hamas also contribute to the appetite for gold as a traded asset, due to its traditional safe haven nature.

These high prices, on the other hand, hampered global demand for gold in the first quarter (-5% year-on-year), but are driving recycling.

“Recycling is the source of gold supply that responds most immediately to economic and price shocks,” says the World Gold Council, while, in contrast, mining production fluctuates more slowly due to “long delays between the exploration and discovery of new deposits and the entry into production of a mine.

The OCM thus found a 12% increase in recycling in the first quarter year-on-year, a maximum since the end of 2020, according to a quarterly report.

“Unlike many other metals, gold is, in a sense, infinitely recyclable,” without losing its properties, notes Krish Gopaul.

Almost all recycled gold comes from jewelry, and the rest belongs to the technological sector, where gold is used for its many virtues: robustness, excellent conductivity but also for the fact that it does not oxidize or corrode.

Lack of alternatives

Gopaul notes, however, that some gold owners are holding on to their assets in the face of macroeconomic and geopolitical uncertainties, counting on potentially even greater long-term gains or wanting to hold an asset at a value that will hold up even in periods of turbulence. .

This is, for example, the case of Turkey, a country plagued by hyperinflation and which has experienced an impressive depreciation of its currency.

In these markets “there is also a lack of valid alternatives to gold” that offer the same performance in times of crisis.

“When times are tough, gold is an asset that many people want to hold onto,” explains Krish Gopaul.

“This is one of the reasons we think the amount of gold people are willing to resell is still lower than in the past during price spikes,” he continues.

Unlike the demand for jewelry, which was affected by the high price of gold, purchases by central banks continued, totaling 289.7 tons during the first three months of the year, and monetary institutions also favored the yellow metal for its virtues of protection against inflation and geopolitical risk.

If prices remain high in 2024, “recycling should continue, as in the first quarter, in response to the rapid increase in prices,” the Council notes in its quarterly report.

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