Gold prices have been scaling to new highs from past four weeks, due to various factors like weak macro-economic environment, geopolitical risk and central banks gold buying.
In India, the yellow metal has been hovering around in the range of ₹71,500-72,500. The rising gold prices is leading to dwindling of demand in the country and prompting Indians to opt for recycling of their old jewelleries amid festive season.
“We have seen higher investment demand for gold in India through various gold investment instruments. Gold prices have gained nearly 8.70% CYTD right before summer wedding season and auspicious Akshaya Tritiya when demand for jewellery and coins tends to remain higher. The record high gold prices may impact India retail jewellery demand going forward as consumers may refrain from buying at current price levels. The lower demand may also affect India gold imports in coming months reasoning with higher prices and weaker rupee,” said Tapan Patel, Fund manager-Commodities, Tata Asset Management.
What is gold recycling?
According to the World Gold Council, recycled gold refers to gold sold for cash by consumers or individuals within the supply chain, like jewelry manufacturers disposing of old inventory. This definition excludes transactions where gold is exchanged directly for gold, such as when retail customers swap old jewelry for new pieces.
‘Recyclable’ gold can originate from old jewelry, known as high-valued scrap, which constitutes approximately 90% of the total supply of recycled gold worldwide. Alternatively, it may come from industrial scrap material, predominantly comprising waste electrical and electronic equipment like computers, tablets, and mobile phones. Despite being used in modest quantities, gold finds application in printed circuit boards and various other components.
India holds the fourth position globally in gold recycling, with 11% of its gold supply sourced from recycled or ‘old gold’ over the last five years. This trend is influenced by fluctuations in gold prices, forecasts for future gold prices, and the broader economic conditions.
Gold Recycling booming in India
Gold recycling is a part of the gold jewellery consumption narrative of the country. Recycling ‘old gold’ has been a tradition in India among a certain price-sensitive customer segment. As the gold price is moving upwards, gold recycling will remain a crucial source of gold supply for some customers.
“Of late, we have been witnessing growth in gold recycling demand from a section of customers at our stores in India due to gold price rise. From April to December 2023, we witnessed 48% of the gold was recycled. Over the last three months, we have observed that 50% gold has been recycled across our branches in India,” MP Ahammed, Chairman, Malabar Group, told Livemint.
The rising gold prices have a near-term impact on volume-based demand, he added.
“Gold is an integral part of the socio-economic ethos of the country and gold jewellery is perceived as a popular adornment and investment tool. Gold price rise may have a near-term impact on volume-based demand. However, the long-term gold jewellery demand outlook remains robust,” Ahammed said further.
Over the past decade, India’s gold refining sector has undergone significant transformation, witnessing a notable increase in formal operations from fewer than five in 2013 to 33 by 2021, according to World Gold Council. This expansion has led to a substantial rise in the country’s organized gold refining capacity, estimated at 1,800 metric tons compared to a mere 300 metric tons in 2013.
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