Is it a good time to sell gold?

Gold prices which continue to break records this year with more than USD 2400 per ounce of gold (28.35g), then again on May 21, 2024. What are the factors that explain this outbreak, how does it fit historically and for jewelry, what are the impacts or alternatives?

How has the price of gold evolved in recent years?

Some dates of 'peaks' in the price of gold which have marked people's minds over the last twenty years:

After a relatively stable period from 1980 to 2000, the price of gold began a historic surge from 2007, boosted by the growth of countries like China and India, and rose to around USD 1000 per ounce and then that it only quoted USD 450/ounce in 2005. The sovereign debt crisis brought down a new record in 2011 to USD 1900 per ounce, then 2020 saw the USD 2000 mark pass with the COVID crisis.

Over the past four years, the price of gold has experienced significant fluctuations, influenced by a series of global events and economic conditions.

• The period 2020 to 2023 was marked by the pandemic, which had a notable effect on gold prices, due to the sensitivity of the metal's price to global economic and political changes. The pandemic has led to unprecedented volatility and a surge in gold prices as investors seek safe havens amid uncertainty.
• Forecasts for 2024: Since 2022, geopolitical tensions with the war in Ukraine and then with that between Israel and Hamas also contribute to the attraction of gold, a traditional safe haven.

Experts predict moderate to sharp rises in gold prices, with some forecasts suggesting that gold could reach around $2,100 per ounce by the end of 2024. Factors such as global central banks' easing of monetary policy and current geopolitical tensions could be at play. origin of these increases. More optimistic forecasts suggest prices could range from $2,800 to $7,000 per ounce, depending on economic and market factors.

A recent study over 50 years shows that periods of falling interest rates in the United States lead to an increase in gold prices. In the current context in 2024, economists predict an increase in the price of gold.

Here is some recent data provided by the World Gold Council for the first quarter of 2024:

Total gold demand increased by 3% year-on-year to 1,238 tonnes (large over-the-counter purchases by investors in particular), the strongest first quarter since 2016.

Furthermore, the first quarter did not see a slowdown in the pace of central bank gold purchases: 290 t (net) were added to official stocks, only a part of which is currently reflected in IMF data.

The demand for bars and coins is increasing by 3% year-on-year, the financial markets on gold are also influencing (decrease of 114 tonnes in global ETF stocks).

The jewelry sector remains active despite the price increase. Global jewelry consumption fell only 2% year-on-year, to 479 tonnes. Jewelry manufacturing increased 1% year-on-year to 535t.

Tech demand for gold increased 10% year-on-year as the boom in artificial intelligence boosted demand in the electronics sector.

https://www.gold.org/goldhub/data/gold-prices

What are the factors that affect the price of gold?

Let's return to the reasons for the increase in the price of gold in recent months.

For gold, prices are typically tracked per ounce in USD on various commodity exchanges, such as the London Bullion Market or the New York Mercantile Exchange (NYMEX). The main drivers of the gold price are inflation rates, interest rates, geopolitical stability, and demand in the jewelry and technology sectors.

• Economic policies, interest rates and currencies: Central bank policies, particularly those related to interest rates, can affect the value of currencies and the attractiveness of gold as an investment. Gold is in fact much more than a raw material, it is also treated like a currency. Therefore, it is necessary to take into account, as we do for a raw material, the costs of production, supply and demand, and also in a much more sensitive way than another commodity, the influences of the economic and monetary policies of the countries (notably the United States), geopolitical risks and tensions. The price of the dollar and the American debt also influence the price of gold: if the dollar depreciates, gold becomes relatively cheaper in other currencies, thus pushing demand and therefore its price in dollars to the rise.

• Inflation: Gold is often seen as a hedge against inflation. Rising prices can provide incentive to buy gold, while periods of deflation can dampen interest.

• Geopolitical tensions: Uncertainty and instability increase the demand for gold as a safe haven, recent events have clearly shown the upward spikes in the price of gold, and its current maintenance and upward forecasts are signs still strong instabilities all over the world.

• Technological and industrial demand: technological applications (electronics in particular) can influence demand. Consumer sentiment in key markets (e.g. China and India) has a significant impact on prices.

• Dynamics of the offer: changes in mining production, recycling rates as well as the development of “secondary” extraction (recycling), both in terms of recycling rates and costs (different in nature and geography from mining production) are key elements in the development of the price of gold.

Where does the gold used in jewelry come from?

To understand the formation of the price of gold, we must also look at its production and therefore its origin.

The main producers of “primary” gold (mines)

South Africa has long remained the world's leading mining producer since the beginning of the 20th century, but moved to 8th place in 2017, overtaken by China (since 2007) then Australia, Russia, the United States, Canada, Peru, and Ghana.

Mining production is very unconcentrated: the 12 largest global mining companies (excluding China, the world's largest producer) produced only 31% of primary gold in 2017, while the artisanal and small-scale mining sector small scale extracts 20% of the gold produced but represents the largest share of the mining industry's workforce and contributes to the livelihood of more than 150 million people.

For around twenty years, the production of ethical and responsible gold has been supported by the establishment of the Fairmined label, an initiative created in 2004 by the Alliance for Responsible Mining or ARM foundation, recognized worldwide for its leading and pioneer in the artisanal and small-scale mining sector. In the 2010s in France, jewelry designers and jewelry houses, such as Chopard, Paulette à Bicyclette, JEM (Ethically Minded Jewelery), Courbet etc. choose Fairmined certified gold, for part or all of their collections. Likewise, the Palme d'Or of the Cannes Film Festival, since 2013, the Nobel Peace Prize trophy since 2015, the Olympic Laurels awarded during the opening ceremony of the Summer Olympic Games since the Rio games in 2016, or even part of the production of several European currencies such as Money of Paris, are starting to be produced with Fairmined certified gold.

“Starting with just a handful of pioneering brands in 2013, the Fairmined initiative has grown to include more than 180 companies (jewelers, refiners and manufacturers) working with Fairmined certified gold across 21 countries from the Americas, Asia, Europe and Oceania. » (https://www.responsiblemines.org/fr/impact/notre-impact/ 2024)

What is the stock of gold on Earth?

In 2018, GFMS estimates the stock of gold "above ground" at around 190,400 t, the bulk of what has been historically mined, distributed 47.4% in the form of jewelry, 16.8% in the form of reserves in central banks, 21.7% in the form of coins and ingots in private stocks, 12.2% in the form of objects or in various equipment, which would total 186,700 t, the rest (3,700 t ) being not inventoried (fig.13). Note that these reserves of 33,763 tonnes stored in the coffers of central banks would cover 101 years of technical consumption of gold (industry, electronics, dentistry) at its 2017 level.

The secondary source of gold: recycling

Recovery (resold and remelted jewelry, recycling of waste electrical and electronic equipment, dental crowns, etc.) supplied the global gold market with 1,210 tonnes in 2017 (compared to 3,300 “primary” tonnes extracted from mines in 2017), or 37%, this ratio is generally around 25% according to the World Gold Council.

This reprocessing activity (extraction and recovery of gold from waste) is often located in countries which do not have gold mining production, particularly in Europe (Germany, Belgium, Switzerland, United Kingdom, etc.), refining work. The largest refiners are located in Switzerland and Belgium (like Umicore in Belgium).

What is the share of recycled gold in new jewelry today?

Consumers of gold jewelry are increasingly demanding about the origin of gold, and reading previous figures clearly prove that while nearly 3,300 tons of gold are still extracted from the ground in 2017, more than 89,000 tons of gold jewelry are in circulation, nearly 92% of which sleep at the bottom of drawers (according to S. de Quercize). If purchasing second-hand jewelry provides the certainty of using this part of the jewelry “stock,” it is more difficult to assess whether jewelry made from recycled gold from a foundry is lots of gold that has already been used.

Recycled gold is rarely traced with certainty and this designation is not supported by supporters of ethical gold, in particular: in fact, cast iron rejects are considered recycled gold (while gold has never become a final object), and there are also gold objects which have no other possible use than to be remelted. Although the gold resulting from these melts is considered recycled gold today, it was not used before.

We can hope that labels and audits on the subject will make the principle of recycled gold more clear and standardized.

From what and how is gold recycled?

Gold is a fungible material, with a melting temperature of 1064.18 °C, that is to say the temperature at which it passes from the solid state to the liquid state, which allows it to be reused and to transform its form infinitely for millennia. In this sense, some people point out that the term “recycling” is incorrect (the definition of recycling was to recover waste to reuse it after treatment). Apart from gold stored pure, and taking into account its use in particular in electronics, its collection and return to its pure state is becoming more and more complex but necessary due to the ecological issues of the primary production of gold. gold. Indeed :

infographics 58 Facettes

Additionally, for the extraction of 20 grams of gold:

Around twenty tonnes of various mining waste will have been produced.

450 kg of CO2 will have been released into the atmosphere

150 liters of fuel will have been consumed, necessary for the operation of the machines.

Recycling electronic and industrial gold

Gold is used in most electronic devices: in certain computer components, in those of smartphones... in tiny quantities (in a ton of electronic cards, there is 1 kilo of gold) but which compared to at many of these objects represent hundreds of tons of metals which are lost if not recycled (especially since the life cycle of these devices is short).

Since 2015, new techniques have made it possible to process this electronic waste on an industrial scale. For example, the Remetox project in France aimed in 2015 to recover more than 95% of these precious metals and the company thus filed a patent which allows it to develop a technology capable of recovering most of the precious metals contained in electronic components. in order to allow their reuse, using methods with a low ecological impact. “Urban mines” whose gold/waste ratio is well known from the start, unlike gold extraction mines!

Is now the right time and why resell your jewelry?

If the peaks in the gold price at the start of 2024 have an impact on the demand for gold production, the resale of the precious metal or its recycling on the contrary becomes attractive. “Recycling is the source of gold supply that responds most immediately to price and economic shocks,” says the World Gold Council, while mining production is obviously constrained by the technical aspects of extraction.

Thus, the World Gold Council estimates the increase in recycling in the first quarter at 12%, a peak since the end of 2020, mainly resulting from the resale of jewelry by individuals.

 However, the safe haven strength of gold limits what people are willing to give up and therefore still prefer to hold on to this asset. Furthermore, one way to limit the impact for people wishing to buy jewelry is to transform it rather than buying new, the demand for which is starting to be slowed down by the high price of gold.

Some errors of judgment not to make when selling gold

• Gold in jewelry is not pure gold but a gold alloy

If you follow the price of gold, remember that gold jewelry is not made from 100% pure gold. In fact, this metal is too soft for jewelry to be sufficiently resistant and to be worn daily. “Gold” jewelry is therefore jewelry made of a gold alloy. In jewelry, this alloy is most often composed of 75% gold, then different metals (silver, copper, palladium, etc.), a mixture which influences the color of the gold. The official denomination is therefore read in thousandths of gold but we commonly speak of 18 carat gold (pure gold being 24 carats, 18 carat gold is equivalent to 75 thousandths gold) while gold 14 carat is made up of 14/24 gold or 58.33 thousandths of gold. At the house of 58 Facettes, we do not accept a lower gold titration (in particular 9 carat gold, since the share of gold is lower than the remaining share of other metals, we do not consider it as jewelry).

We should therefore not compare the price of gold per gram to the price offered per gram of an all-gold piece of jewelry: only 75% of the weight corresponds to that of gold.

You can read: Carats of gold, what differentiates them?

•  Gold buyback includes reprocessing costs

Like any raw material, the purchase price and resale price of gold is different. This difference is due to the cost of remelting the purchased gold and its reprocessing: it must be melted then separated from other metals etc., after the titration of the gold in your jewelry has been checked, which our experts do systematically in order to be able to estimate your jewelry. (to understand the different titrations of gold and the verifications, in particular thanks to the hallmarks, you can read: The hallmarks 

Gold work on jewelry deserves to be valued 

Sell jewelry and not the gold of your jewelry! When a vintage piece of jewelry is of quality and in good condition, it is worth more than its weight in gold: let's not forget that it will be necessary to pay for the refining of the worked metal then the cost of manufacturing an identical piece of jewelry (sometimes with a technique which has disappeared or has become much more expensive to implement) to recreate the jewel which will have been cast.

For anyone wishing to acquire a piece of jewelry, an all-gold vintage piece of jewelry, its price based on the weight of gold will therefore be between these two prices: the price of gold at its fineness and the price of the equivalent new piece of jewelry. The valuation range for vintage jewelry (without the signature of a recognized brand) is between 50 and 80% higher than the gold price of its grade.

Whether to buy it or to sell it, have an all-gold vintage piece of jewelry valued by a professional who will confirm whether it is of quality and whether its design and work is attractive to the market, which will allow you to value it better than its weight in gold.