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Process Scrap and Old Scrap

The recycling of gold takes two forms—so-called process scrap and old scrap. The former concerns gold that never ends up in a finished product and returns unused to a refinery for remelt. This includes areas such as the edgings to a sheet of metal once coins have been stamped out or the filings recovered from the polishing or engraving of jewelry. Because this effectively forms part of a continuous loop, it is of no interest to an economist and is excluded from analysis. Old scrap, in contrast, is the metal recovered from finished items containing gold. The vast bulk comes from jewelry, although small amounts are also received from other areas such as electronic goods or dental alloys.

Old scrap is typically the second largest source of supply after mine production, accounting for approximately a quarter of total supply each year. The amount, however, can prove quite volatile, surging, for example, to a then record of about 1,100 tonnes in 1998 on the back of the East Asian economic crisis before slumping to about 600 tonnes the following year.

Selling by individuals during a time of financial crisis is but one reason for dishoarding. However,perhaps the greatest determinant is changes in the price of gold. One example of this would be the increases in scrap seen emerging from the Middle East at times of high gold prices. Other factors nonetheless mean old scrap does not always track changes in the price. A recession, for example, could trigger an increase in scrap as manufacturers, wholesalers, and retailers remelt unsold jewelry inventory. Changing fashion can even influence scrap, as we are seeing increases in scrap in western Europe as inherited jewelry pieces—considered too dated to be worn by their new owners—are remelted.