Recycling: is a circular gold economy a possibility?

ESG Arnulf Hinkel, Financial Journalist – 13.03.2023

In an interview with BNN Bloomberg, Stephen Lezak, commodities and sustainability expert at Oxford University, outlined his research findings regarding a slow gold production transition from mining and recycling to pure recycling. Thus creating a closed loop could minimise the environmental footprint of the precious metal. Lezak points out that gold is virtually imperishable and that, by the end of 2022, 208,875 tonnes of the precious metal had been mined and were theoretically available. How viable is his thesis?

So far, a quarter of the annual gold supply is recycled gold

In 2022 – very similar to previous years – 4,754 tonnes of gold were produced, of which 3,612 tonnes were mined, and 1,144 tonnes were recycled. In the past, the share of recycled gold usually ranged between 24 and 27 per cent, but has been significantly higher at times, for example 42 per cent in 2009. This peak was due to a high gold price, which spurred owners of scrap gold to sell. Considering that the jewellery industry accounts by far for the largest share of the annual gold demand (42 per cent), the sector might well bear significant growth potential regarding its recycling share. The fact that so-called urban mining – the recovery of gold from e-waste – is far from exhausted also speaks for a significantly higher potential recycling share in gold production.

How would gold demand and prices react?

In 2022, around 22 per cent of the annual gold supply was sought by investors, and 17 per cent by central banks. Gold – which has always been a scarce commodity – would become even more rare. This could drive its price and thus also the supply of scrap gold. Investors would get less gold for the same investment amount, while gold jewellery buyers might have to turn to lower purity grades.

Incidentally, the scenario presented by Stephen Lezak is not purely hypothetical: according to the U.S. Geological Survey’s 2019 annual report, the earth’s economically minable gold deposits of today might be exhausted by 2034.

(All data provided by World Gold Council.)

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