Rising gold prices drive Indians into jewellery recycling; here’s what experts say

Gold prices have been scaling new highs for the past four weeks across the globe, thanks to various factors including a weak macroeconomic environment, geopolitical risks and central banks buying the precious metal.

In India, the yellow metal has been hovering around in the range of ₹71,500-72,500. The rising gold prices lead to dwindling demand in the country and prompt Indians to opt for recycling their old jewellery amid the festive season.

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“We have seen higher investment demand for gold in India through various gold investment instruments. Gold prices have gained nearly 8.70 per cent CYTD right before the summer wedding season and auspicious Akshaya Tritiya when demand for jewellery and coins tends to remain higher," said Tapan Patel, Fund manager-Commodities, Tata Asset Management.

"The record high gold prices may impact India's retail jewellery demand going forward as consumers may refrain from buying at current price levels. The lower demand may also affect India's gold imports in coming months, reasoning with higher prices and weaker rupee,” he observed.

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 jewellery manufacturers disposing of old inventory. This definition excludes transactions where gold is exchanged directly for gold, such as when retail customers swap old jewellery for new pieces.

'Recyclable' gold can originate from old jewellery, known as high-valued scrap, which constitutes approximately 90 per cent 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.

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India holds the fourth position globally in gold recycling, with 11 per cent 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 broader economic conditions.

Gold recycling booms 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 the gold price rise. From April to December 2023, we witnessed 48 per cent of the gold was recycled. Over the last three months, we have observed that 50 per cent 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.

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“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 the World Gold Council. This expansion has led to a substantial rise in the country's organised gold refining capacity, estimated at 1,800 metric tons compared to a mere 300 metric tons in 2013.