The Ups and Downs of Gold Recycling
Gold has long captured humankind’s imagination. It is malleable, ductile, and corrosion resistant, and it has many uses—from jewelry to technologies such as mobile phones and spacecraft safety equipment. Since gold does not tarnish or decay, all the gold ever mined still exists in some form. The 2014 Thomson Reuters GFMS Gold Survey estimates that at the end of 2013 the aboveground stock of gold amounted to 176,000 metric tons. This stock comprises jewelry, official holdings, private investment, and industrial fabrication. A small amount is lost to the market over time and is thus unaccounted for. (See Exhibit 1.)
While the entire aboveground stock has the potential to be recycled, very little of it should be considered near-market supply. Indeed, when gold recycling hit record levels in 2009, it amounted to just 1 percent of the entire aboveground stock. Much of this stock may never come back on the market, for the following reasons:
For many people, jewelry has sentimental value and evokes powerful emotions, making them reluctant to part with it.
Some people’s connection with gold is religious. Much of the gold stored in Indian temples, for example, is viewed as sacred.
Many investors view gold as an intergenerational asset, to be handed down through families rather than sold.
Central banks view gold as an important reserve asset, and recent trends suggest they are more likely to buy than sell gold.