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Scrap Gold Recycling Jumps, Mining Output Set for Record Year

Little 'distress' selling so far as gold price hits new records...
SUPPLY to the global gold market set its highest first-quarter total since 2016 in January-to-March, new data says, with record-high prices spurring a jump in secondhand and scrap recycling as strong mining output put the sector on track for a record full-year total.
Re-sales of jewelry plus technology-use metal rose 12.5% from a year before according to figures from mining-industry body the World Gold Council, hitting the highest level since Q3 2020, when a break in global Covid lockdown policies enabled consumers to raise cash amid that crisis' economic slump and then-all-time-high gold prices.
Mine supply meanwhile rose 4.4% year-on-year, setting its second record Q1 figure in a row and suggesting that 2024 will beat 2018's full-year peak of 3,656 tonnes.
Led by double-digit growth in Canada, Ghana and Indonesia – and with output from world No.1 mining nation China rising some 5% – the growth in mined output has so far failed to boost the stock-market value of Western-listed operators, now up 8.0% in 2024 to date, barely half the percentage gain in physical gold bullion prices.
Amid today's "increasingly favourable price environment...additional supply [will start] coming on-stream in the next two years," say specialist analysts Metals Focus – the consultancy behind the gold supply and demand trends' data published this week by the WGC – "primarily driven by North America."
Charts of global gold scrap flows and mining output. Source: World Gold Council
Back in the first quarter of 2024, "Increases [in the second-hand gold flow] were seen in almost all markets and regions," says the World Gold Council's latest report.
"But the [global scrap] increase has been more modest than some may have been expecting given the gold price ascent" with a sharp rise in Thailand still "remaining below levels seen during the pandemic" while there were "very few reports of distress selling" in No.2 consumer market India or across Europe, even as net demand for gold coins and small 'retail investment' bars in Western economies sank on a surge of gold profit taking.
Recycling volumes in the USA "increased only marginally," the WGC goes on – a sharp contrast to the 'cash4gold' phenomenon amid gold's price surge during the global financial crisis – and "trade rather than retail flows were behind the uptick" as jewelry stores sold excess inventory into this spring's new record-high prices.
But world No.1 gold consumer China saw household selling increase more notably, mirroring a slowdown in new jewelry purchases. Indeed, "some small and medium-sized processing companies have suspended operations and taken holidays" reported the China Gold Association last week as "rapidly rising gold prices have increased wait-and-see sentiment" among would-be buyers, leading to slower demand across the jewelry supply chain even as China's gold coin, small bar, ETF, banking app and speculative demand has jumped.
As for gold mining supply, "the new projects coming on-stream tend to have a long mine life and are cost competitive," says Metals Focus, "making them resilient throughout gold price cycles."
Record-high costs still offered the industry a profit margin of 46.9% in the final quarter of 2023 on an all-in sustaining basis. But while analysts at S&P Global's Commodity Insights foresee AISC falling for the largest Western-listed mining firms across the next 5 years – "providing a catalyst for some upside to future [stock market] performance – their gold production per share has almost halved across the past 15 years, notes Metals Focus.
"Several gold mining companies are once again issuing new equity," diluting the profits for shareholders still further.

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