11 August

A trend on the rise

In recent years we have seen a steady increase in the recycling of Gold, feeding a supply of Gold back into markets internationally. There are several factors that contribute towards the recycling of Gold, including the increase in the price of Gold and the growing concern over Gold mining pollution. The sale of Gold back into the market assists in countries buying less Gold from the international market, helping to keep local Gold prices more steady.

Source: World Gold Council

At an exchange level, there are two main options: either one can sell the Gold jewellery to the Gold Exchange for cash, or the customer can choose to refashion their Gold jewellery by melting it down back into its liquid form to take a whole new, and more fashionable, shape and style.

 

The recycling trend has been validated in two of the biggest Gold buying markets in the world, China and India. The primary driver behind this trend is the rise in the price of Gold. Gold investors who are particularly sensitive to the fluctuations in price use this as an opportunity to cash in.

 

The third quarter of 2016 saw a substantial increase in the Gold price which led to people selling off their Gold stock, mainly comprising of jewellery and coins (high-value Gold). Recycled Gold equalled 340.9 tons in Q3, up 30% from the same period the previous year. Cumulatively, recycled Gold in the first three quarters of 2016 amounted to 1,042.3 tons, up 18% from 2015.

 

Recycled Gold comes mainly out of price sensitive markets like India and China, but we are equally as price-sensitive a nation and the South African market has also noticed the increase in the price of Gold. South African consumers have responded accordingly, evidenced by an increase in the local sale of high-value Gold. Currently, in Mr Kruger stores, there is a trend toward customers converting their Gold into cash and using the money received for a variety of expenses, including school fees, medical expenses or even to pay for a dream holiday.

Generally, recycling Gold accounts for one-third of total supply (1995 – 2014), according to a recently published report done by the World Gold Council. According to The Ups and Downs of Gold Recycling, 90% of the total recycled supply comes from high-value Gold (i.e. jewellery and old coins) since reclaiming Gold from the end of life electronics is more complicated, and has a much smaller yield.

 

With an environmental downside to our brilliant, yellow metal, it is no wonder that Gold recycling is on the rise globally. Big brands are also getting in on the action, both in terms of cost-savings and in terms of being recognised as environmentally conscious and forward-thinking brands. In 2015, consumer technology giant Apple recorded a recovery of $40m from their recycled devices. Meanwhile, across the North Pacific, the Tokyo Olympic Committee have considering minting the official Olympic medals out of Bronze, Silver and Gold that has been reclaimed from discarded smartphones.

 

The Gold.org report highlights that there are some reasons why people wouldn’t want to consider recycling their jewellery or coins, like the sentimental value of Gold which makes some people very reluctant to part with it. Some even place religious significance in the unique and changeable substance.

 

On the other hand, there are some good reasons why people would want to recycle their old Gold jewellery and coins, for example, when people grow older and choose to downsize to a smaller house and they need to sell off some assets. Old jewellery can be too expensive to fix and out of style, and it simply just lies in the safe. Many people would rather convert jewellery that they don’t wear anymore – either because their taste has changed or because they are security conscious – into something of more tangible value, like cash, which can be available immediately.

 

Others consider the value of Gold as an asset and want to hold on to their old jewellery for as long as it appreciates, with the view of one day passing it on to their children. “Many investors view Gold as an intergenerational asset, to be handed down through families rather than sold.” If this is the case, these investors are urged by experts to consider trading jewellery and other coins in for Krugerrands, which are much easier to store (they can be kept in safe storage) and the value is much easier to preserve. If you are interested in discussing the value of your child’s inheritance, come into Mr Kruger and speak to a Bullion Specialist about your options.