Record gold prices are weighing on overall demand but boosting the recycling of the precious metal, with individuals offloading 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 goods to take advantage of the high price levels,” Krish Gopaul told AFP. analyst at the World Gold Council.
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 ensured through recycling.
Since the start 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, galvanized by expectations of a drop in American interest rates which make the dollar less attractive.
Heightened geopolitical tensions with the war in Ukraine and that between Israel and Hamas also contribute to the appetite for gold as a listed asset, for its character as a traditional safe haven.
These high prices, on the other hand, weighed down global demand for gold in the first quarter (-5% year-on-year), but are boosting recycling.
“Recycling is the source of gold supply that responds most immediately to price and economic shocks,” says the World Gold Council, while on the contrary, mining production fluctuates more slowly due to “long lags between exploration and the discovery of new deposits and the entry into production of a mine.
The CMO thus noted a 12% increase in recycling in the first quarter year-on-year, a peak since the end of 2020, according to a quarterly report.
“Unlike many other metals, gold is in some sense infinitely recyclable,” without losing its properties, notes Krish Gopaul.
Almost all recycled gold comes from jewelry, and the rest concerns the technology sector where gold is used because of its many virtues: robustness, excellent conductivity but also the fact that it does not oxidize. or does not corrode.
Lack of alternatives
Mr. Gopaul notes, however, that some gold owners are holding on to their assets in view of macroeconomic and geopolitical uncertainties, counting on possible even higher gains in the long term or wishing to maintain an asset at a value that is preserved even in periods of decline. turbulence.
This is for example the case in 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”, offering the same performance in times of crisis.
“When times are tough, gold is an asset that many people want to hold on to,” explains Krish Gopaul.
“This is one of the reasons why we think that the quantity of gold that people are willing to resell is still lower than what it was in the past during price peaks, he continues.
Unlike the demand for jewelry, which suffered from the high price of gold, purchases by central banks were maintained, totaling 289.7 tonnes for the first three months of the year, with monetary institutions also favoring the yellow metal for its virtues of hedging against inflation and geopolitical risk.
If prices remain high in 2024, “recycling should continue, as in the first quarter in response to the rapid rise in prices,” notes the Council in its quarterly report.