Gold gained 61% since the end of 2008 as the Federal Reserve was joined by central banks in Europe and Japan in seeking to boost economic growth by buying bonds. The stimulus contributed to an almost doubling of sovereign debt to more than $23 trillion, a Bank of America index shows.
Scrap volumes, mostly from jewelry, reached 47.3 million ounces last year, or 37% of the 127.3 million ounces of refined supply, according to New York-based CPM Group.
The U.S. is the largest scrap supplier, followed by Italy and China.
“When the price goes down, no one wants to sell back into the market,” said Dick Poon, the general manager of Heraeus Metals Hong Kong Ltd., a refiner and trader. “Scrap flows were already lower this year compared to previous years, and are not likely to come back for the time being. Scrap may not return until the price goes back above $1,600.”
Sumitomo Metal Mining Co., Japan’s biggest gold producer, is processing little scrap and instead mainly using ore and by- products of copper smelting to supply its bullion refining business, said Masashi Takahashi, a spokesman in Tokyo.
“Business is not good,” said Leah David of Leah David Fine Jewelry and Watch Boutique in Manhattan, who has been in the business since 1986. “Since very few people want to sell anything, jewelers like me will have no choice but to sell our own inventory or the new jewelry as scrap. We have done that a few times in the past, and may need to do that again.”