Is The U.S. Running Out of Gold Scrap?

As the U.S. economic and financial system continue down the road of self-destruction, there is an increasing amount of evidence that suggests the day of reckoning is fast approaching

One such indicator is the amount of U.S. gold export scrap.  At one point in time, the United States was exporting a great deal of gold scrap and waste, however it looks like its citizens are now…. tapped out.

In a previous article, “U.S. Total Gold Exports Up 31% in Oct 2013”, I discussed the record amount of gold bullion being exported from the United States.  The table below shows just how much gold is leaving the country:

Total US Gold Bullion Exports 2013 Jan-Oct

In the first ten months of the year, 449 metric tons (mt) of gold bullion were exported from the U.S. with the majority going to Hong Kong (193.6 mt) and Switzerland (143.5 mt).

While the U.S. is sending a record amount of gold bullion to foreign countries, gold scrap supply has fallen off a cliff in 2013.  If we look at the chart below, we can see just how much gold scrap exports have declined in the past year.

U.S. Gold Export Scrap

According to the USGS Gold Mineral Industry Surveys, the United States exported a record 886 mt (gross weight) in 2008.  Gold scrap exports declined to 728 mt in 2009 and then stayed basically flat for the next two years at 630 mt and 633 mt respectively.

However, in the past two years, gold scrap exports have declined substantially.  Here we can see that in 2012, gold scrap supply declined more than 50% to 266 mt compared to the previous year.  And in the first 10 months of 2013, U.S. gold scrap exports have fallen another 50% to only 121 mt.

The World Gold Council (statistics from Thomson Reuters GFMS) states that global gold scrap for recycling declined in 2013 due to the huge fall in the price of gold.  According to their statistics, total global scrap declined to 662 metric tons 1H of 2013:

World Gold Scrap & Recycling

Furthermore, GFMS believes global gold scrap will increase to 736 mt in the second half of 2013.  I don’t see how this is possible as the price of gold was still quite low during this time period.  Also, U.S. gold scrap exports continue to decline in 2013.

I estimate that total global gold scrap supply will be 650 mt in 2H of 2013 which would end up being a little more than 1,300 mt for the year.  GFMS is forecasting almost 1,400 mt for total global gold scrap supply in 2014.

Of course these are official figures, and we really don’t know what is the true amount, but we can certainly see that the U.S. is running out of gold scrap supply to the international market.

I would imagine when the markets crashed in 2008, U.S. citizens were turning in their gold for much-needed cash.  That is why we had a record amount of gold scrap exports of 886 mt (gross weight) in 2008.

The notion that price dictates the amount of gold scrap entering the market fails to address the huge drop in U.S. gold scrap exports in 2012.  The average price of gold was higher in 2012 than it was in 2011.  So, why did the amount of gold scrap exports fall to only 266 mt?

This is indeed a good question, and I believe the answer is quite simple.  Americans are just tapped out of gold scrap they can sell into the market… regardless of the price.  Even if the price of gold increased substantially from here, I don’t believe we are going to see much more gold scrap supply coming from the United States.

This is just another indicator that spells big trouble for the future of the U.S. financial system.  As the Indian government cracks down on gold smuggling into their country, U.S. citizens continue to purchase cars and homes with no money down and with very little credit verification.

Instead of fixing the problem, we have created an even worse financial nightmare than what took place in 2007-2008.  Unless you have protected your wealth with gold and silver… time is not on your side.

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13 Comments on "Is The U.S. Running Out of Gold Scrap?"

  1. When reporting exports of gold from the US, the important question is: who owned that gold? Some of the gold held on deposit in the US is foreign owned. Many foreign governments keep some of their gold at the Federal Reserve Bank in New York. So when this gold is repatriated (as it happened recently to gold owned by Germany), is this gold movement included in the export numbers of scrap gold? (I assume that scrap gold denotes any gold which is not freshly mined.) Unfortunately, the article did not address that question. Since the gold acquired by Germany is at least 50 years old, it must be classified as scrap gold (since it is not newly mined gold).

    We also know that for every ounce of gold kept in the financial system, there are more than 50 different paper gold claims on that ounce of gold. So the question of real ownership of the gold being exported is really a difficult question. To say the US exported X tons of gold carries the tacit assumption that the gold exported was owned and sold by an US entity. In reality that gold could be owned by A, sold by B (rehypothecation) and exported by entity C.

    In my opinion, gold export and import numbers are meaningless unless the true identity of A, B and C is revealed. And, if that is impossible, then at least a reasonable assurance is given that the gold in question is indeed US owned gold.

    • Robert,

      You bring up some excellent points. I agree that we need to know more specifics on who owns the gold. However, it does not change the fact that a large amount of gold is still heading EAST to China. Furthermore, we can clearly see that U.S. Gold export scrap is falling quite substantially.

      All I am trying to show is some basic numbers here. I believe the situation is far worse than the figures I am reporting.

      February is a big DELIVERY MONTH for gold from the Comex. With only 370,000 oz of gold in the Registered category for delivery, it is going to be quite interesting.

      steve

      • I have been scraping silver and gold for 20 yrs !! This report is dead nuts on the well is getting dry and what is left is in strong hands or people who do not want to part with there gold & silver till the price gos up !! craigs list is nothing but over priced diamond rings or watches, I buy from 10 or so pawn shops scrap is down in ever one !!!!! Sam

  2. Steve:

    I see the source of the data is the US Census Bureau. It’s much different than USGA data: http://minerals.usgs.gov/ds/2005/140/ds140-gold.pdf

    Kind of makes me wonder if the US Census Bureau data includes something besides secondary gold which is supposed to include old scrap from items scrapped and leftovers cuttings from fabrication of new products – jewellery, medallions, coins, industrial products?

    Got any ideas why there is such a difference in the 2 sets of data?

  3. Hello Steve, could you please comment in regards to your own analysis and opinion what you think of this …
    http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/10575292/Coming-oil-glut-may-push-global-economy-into-deflation.html
    Appreciate it.

    • Last two paragraphs of the article sum it up well…

      To avoid confusion, let me be clear that the dangers of dwindling oil supplies in the long-run have not gone away. Easy reserves of crude are being depleted. New fields are more costly. Peak oil may have the last laugh. Yet this should not be confused with the short-term risks of deflationary shock.

      I recently attended a Transatlantic Dialogue on Energy Security with senior military officers in London and Washington. The message was that shale will come and go – with US tight gas peaking by 2017 – creating a false sense of security as the deeper strategic threat continues to build. That is broadly my view as well. Much drama can intrude along the way.

    • David,

      Anything is possible in the short term. Yes, it is true that U.S. Shale oil production has brought a good bit of oil to the market. However, this will not last and even Ambrose Pritchard stated this at the end of his article:

      To avoid confusion, let me be clear that the dangers of dwindling oil supplies in the long-run have not gone away. Easy reserves of crude are being depleted. New fields are more costly. Peak oil may have the last laugh. Yet this should not be confused with the short-term risks of deflationary shock.

      I recently attended a Transatlantic Dialogue on Energy Security with senior military officers in London and Washington. The message was that shale will come and go – with US tight gas peaking by 2017 – creating a false sense of security as the deeper strategic threat continues to build. That is broadly my view as well. Much drama can intrude along the way.

      Again, I believe the FED adding $Trillions in liquidity (as well as other Central Banks) to the financial system has allowed to the market to purchase a certain percentage of oil that it cannot afford.

      While the world has been given a PAUSE in PEAK OIL, the downside of the slope will be much steeper than was the 150 year rise.

      steve

  4. Steve:

    Note that in 2011 and 2012 gold compound exports reported by the US Census Bureau amounted to 2820 and 4240 tons. Don’t think it’s pure gold – i.e. perhaps it’s gold paint. I think the same is also true about the gross weight of gold waste and scrap – i.e. obsolete industrial products which contain a small amount of gold shipped overseas to be recycled?

    The data reported by the us census bureau (gold scrap) contradicts the data provided by the usgs and gfms so I think the #s are highly suspect and should not be used to make investment decisions.

    • Norm,

      The USGS reports different categories for Gold products. Waste & Scrap is different from ‘Metal Power” and “Gold Compounds.”

      Waste & Scrap is much higher content gold than the other two categories.

      For example… The 2011 USGS Gold Year Book lists the values for the different gold products:

      2011 Gold Waste & Scrap = 660 metric tonnes = $2.18 billion
      2011 Gold Powder = 2.3 metric tonnes = $74.7 million
      2011 Gold Compounds = 4,270 metric tonnes = $107 million

      I spoke with the USGS specialist on the subject of the U.S. Census Bureau and export data. He did say that figures do not add up all the time, but at least the USGS offers data that is a good overall guideline even though it might not be exact.

      Also, the USGS specialist let me know that the industry is not exporting as much gold scrap due to the fact that it is running low and there was a stipulation by the U.S. government to limit gold scrap exports.

      steve

  5. “For example… The 2011 USGS Gold Year Book lists the values for the different gold products:

    2011 Gold Waste & Scrap = 660 metric tonnes = $2.18 billion
    2011 Gold Powder = 2.3 metric tonnes = $74.7 million
    2011 Gold Compounds = 4,270 metric tonnes = $107 million”

    Thanks Steve but :

    I think you made my point. i ton is 32150 ozs or about $40 million at current market price. Therefore, 50 tons of 99.99% gold is about $2 billion. So I would have to conclude that the vast majority of the 2011 gold waste and scrap – 660 tons- is not gold. If it were 99.99% gold it would have a market value in today’s price of about $26.4 billion.

    • Norm,

      Yes… thanks I did know that. Total North American Gold Scrap is only forecasted to be about 120-130 metric tonnes.

      steve

  6. If we think about this it makes sense. 2-3 years ago I was selling scrap gold. Today I am not. I still have scrap gold, but I believe the price will rise, so I will hold onto it for now. The supply of scrap gold is still here, but it is out of the weak hands and into the hands of the people who can afford to hold it. When the manipulators smash the price again we will be buying, not panic selling.

  7. several CASH FOR GOLD stores in my area (chicago) have closed in the past year

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