Chapter 6 - Pool of Products

Gold is unique as a commodity in that true consumption is trivial and so the vast bulk of historic mine production remains above ground in various forms with the potential to be sold back into the market. Various estimates have been published over the years to quantify this stock and, having reviewed what data is available, it would not be surprising if this stood at around 200,000 tonnes.

In the context of recycling, we need just concern ourselves with fabricated products, which only form a portion of this total. Of this, jewellery is by some margin the largest at over 90,000t. This implies that a little over 1% of the jewellery pool returns to the market each year as scrap. Electronics stands at around 10,000t but we would argue that this is best viewed as a figure representing cumulative fabrication rather than a stock, since so little is properly available to the market and a good portion is in landfill and therefore cannot be classified literally as an above-ground stock.

The same applies to dental uses, whose cumulative fabrication is again of the order of 5,000t. That just leaves decorative and other industrial applications, whose cumulative historic fabrication would be similar to dental, although essentially none of this is available to the bullion market and so it is even harder to call this a stock.

With the jewellery figure, we also need to acknowledge that a slice of the total is effectively unobtainable, being held in such forms as historic artefacts or high margin branded jewellery and watches. The stock figure also fails to take into account manufacturing losses, which trim stocks by around 2%, if not more. Establishing stocks’ true scale and composition however has not been attempted, chiefly due to the difficulties involved in doing so and to the fact that the big picture would not change at all; above-ground stocks of jewellery are equal to at least 20 years of mine production, and it is not that relevant if the figure is 25 or 30 years.

That said, there is perhaps something to be gleaned from country-level analysis. Data on country-level stocks of jewellery has never been published but it seems that India has the largest stock, closely followed by the US and China. Collectively, Europe and perhaps the Middle East would have stocks somewhat larger than those latter two countries.

This could matter, as we have already seen how western scrap has retreated from its 2010-12 highs, with the depletion of near-market stocks being cited as the main driver. We should not jump to the conclusion however that other regions will copy the West in terms of low near-market volumes.

Firstly, per capita holdings in the West are far higher than in India and even more so China.

Secondly, stocks outside of the West are dominated by low margin high carat items and their ability to come back to the market is far greater than is the case for the lower carat, higher margin pieces in the industrialised world. It is true that some markets (most obviously China) have started to shift towards higher margin pieces, but this is recent and so such items’ share of jewellery stocks is low.

Thirdly, there is considerable disagreement among research contacts over the scale of remaining near-market stocks in the industrialised world. Some may argue that they are indeed low, while others believe that they remain substantial and are just waiting for the right price, true economic distress to emerge and for more recently bought pieces to once again become unfashionable.

Lastly, one must not forget that the stock of jewellery is growing each year – growing by around 1,000t annually over the last decade. Growth will remain similar as long as fabrication is greater than recycling, and it is of note that this even occurred in 2020. As a result, there is clear scope for scrap to continue supplying around a quarter of total supply, with the benefit of this growing pool countering the ongoing but modest change in its structure.