According to the World Gold Council, Europe’s demand for freshly minted coins and bullion bars is at its lowest. The drop is significant. It is at levels that have not been seen in a while. Jewellery owners, on the other hand, have reduced the selling of their gold jewellery despite the high price of gold. Recycling is an important cog in the gold production cycle and with talk of mines reaching peak gold, the trend is worrying. It means that there is less ready to sell gold on the market or that bullion dealers are sitting with inventory for longer periods than they should.
The levels of recyclable gold for the first quarter of 2007 and of 2018 reached the low levels that they were on in 2007. The high price of gold should have translated to more people selling their scrap gold, but it would seem there are less cash-strapped people. This might have to do with the strong economic growth in most Western Countries. Brexit has the UK worried, the U.S Trade war, The U.S withdrawing from the Paris Climate Accord spells impending disaster, but that trouble hasn’t been evident yet and maybe people aren’t worried about buying gold to store their wealth.
Europe and America might have gotten used to the story of gold being near depletion which would have made scrap gold dealers less sensitive to the gold price. For dealers, the spot price of gold might be too high for launching a concerted effort to get as much gold as they can. The decline in demand for new bullion coins in the U.S has given rise to the secondary market where coins are being circulated amongst collectors. This trend has continued on to the second quarter of 2018 despite the rising gold price. More gold coins are sold at auction or traded amongst collectors. This is the gold that mostly goes unaccounted for. Gold that is sold by gold dealers, refineries and mints is easy to account for but the amount of gold that has been moved around from dealers to dealer and then to investors is based on speculation. Is it that the industry has enough mined gold to fulfil all that is required and there is supplementary gold needed in the form of recycled gold to meet demand?. Maybe the demand for investment bars and coins has declined but the demand for gold in industrial use has not subsided.
The US Mint has reported sales levels they have not seen since 2007. Germany, on the other hand, has increased its gold consumption. It has managed to move from 12th place to 4th place in the table of gold consuming nations. Germany’s household demand for investment gold has risen to 92% between 2013 and 2017. The global average during this period was close to 33%. However, in the first quarter of 2018, it too experienced a dip in demand. The gold market is holding out for this to change but there are so many factors that play into this, it’s hard to determine when everyone will reach a tipping point for things to start changing.