Recycled gold supply at seven-quarter high

Recycled gold supply hit the highest in seven quarters after the precious metal prices set the record high in the last quarter of the 2010 calendar year.

Data compiled by the World Gold Council (WGC), the global body funded by leading gold miners, show that recycled gold supply surged to a staggering 475 tonnes in Q4 of 2010, the second highest so far in the last five years. In the corresponding quarter of the previous year, however, used gold supply was recorded at 400 tonnes. For the quarter ended September 30, 2010, however, the total supply from used gold was 390 tonnes.

Gold’s supply from consumer sources hit the highest in the first quarter of 2009 when global investors were sold the yellow metal in jewellery form to square off part of their loss in equity market in the post global economic crisis era. During the quarter under consideration, total gold supply from secondary sources increased to over 603 tonnes, nearly 57 per cent rise from the previous quarter’s level of 385 tonnes.

In India, however, the average quarterly supply of recycled gold was 14 tonnes during the last year. Contrasting the findings of WGC, Vinod Hayagriv, former chairman of All India Gems & Jewellery Trade Federation (GJF), said, “As a thumb rule, around 30 per cent of India’s gold demand is met through secondary sources generated through recycling used jewellery.”

But, consumers are holding gold today in anticipation of high prices. Hence, the supply of used gold has come down, said Hayagriv.

While gold prices continued the uptrend in 2010, recycling activity declined 1.2 per cent to 1,653 tonnes from 1,672 tonnes a year earlier. This was partly driven by continued economic growth in emerging economies, especially in India and China which substantially contribute to recycled gold supply. However, recycling activity remains high on a historical basis, especially among Western consumers who have gradually seen a rising trend. This, coupled with higher price levels ensured that profit-taking on recycled gold in Western markets was marginally higher than year-earlier levels. Similarly, West Asian and Asian markets, other than China and India, witnessed a consistent supply of recycled gold during 2010.

Total gold supply including mine production, recycled gold and official sector transactions totalled to 4,108 tonnes during 2010, a two per cent increase over 2009. However, the performance from different sources of supply was not uniform. Mine production was up, but recycling activity subsided from 2009 levels and central banks turned net buyers during 2010 for the first time in 21 years.

Meanwhile, the $7.5-trillion global gold market is witnessing a robust growth due to staggering price escalation. Gold price rose by 2.4 per cent per cent during Q1 to $1,439 an oz by March 31, on the London PM fix, a more modest rise relative to average gains of 6.2 per cent per quarter over the past two years.