U.S GOLD SCRAP MARKET DRYING UP: Americans Pawned Off Their Best Asset To Go Further Into Debt

After the U.S. economy disintegrated in 2008, due to the Banking and Housing crisis, Americans pawned off a record amount of gold.  How much gold?  Nearly, 32 million oz (1,000 metric tons).  That’s one heck of a lot of gold.   Matter-a-fact, U.S. gold scrap supply at its peak of 160 metric tons (mt) in 2011, was more than any other country in the world, even India and China.

It is quite unfortunate that Americans have pawned off their best asset only to go further into debt.  Thus, enabling them to buy more garbage and trinkets they really don’t need.  This is quite the opposite of Americans who become being extremely frugal and financially responsible after the 1930’s Great Depression.  Today, banks have made it easy for Americans to BUY NOW and PAY LATER.

The consequences of this “Buy now, pay later” economic model is explained in this recent zerohedge article, 45% Of Americans Spend Up To Half Their Income Repaying Credit Card Debts:

First, roughly 50% of Americans have debt balances, excluding mortgages mind you, of over $25,000, with the average person owing over $37,000, versus a median personal income of just over $30,000.

Therefore, it’s not difficult to believe, as Northwestern Mutual points out, that 45% of Americans spend up to half of their monthly take home pay on debt service alone….which, again, excludes mortgage debt.

Because 45% of Americans are paying up to half of their monthly income to pay down credit cards and debt, they can’t use this income to purchase new goods and services.  Thus, a staggering amount of the U.S. Gross Domestic Product (GDP) has been brought forward… thanks to easy credit and credit cards.

And, This is what Americans spent the most money on in the first quarter:

But that doesn’t mean that Americans stopped spending completely, quite the contrary. According to the BEA’s “goalseeked” models, even as retail sales tumbled, as Obamacare continued to drain disposable income away from other discretionary purchases, Americans – who spent far less on cars, clothing and housing in the first quarter than in Q4 – were scrambling to buy… recreational vehicles!?

When I travel up and down on the interstate where I live, I see a lot of these Recreational Vehicles (RVs), especially on the weekends.  What is even more hilarious, is to see a huge 4X4 truck pulling a large RV, which is also pulling a smaller trailer behind it with two ATV’s on it.  All of these vehicles consume one hell of a lot of fuel.

This sudden motivation for Americans to get into a RV and leave the RAT RACE (for a weekend), makes perfect sense to me.  This is an extremely important indicator showing how Americans would rather go further into debt up to their eyeballs…. just to GET AWAY from it all.   Americans spending a record percentage of their funds on RV’s to escape the insanity, suggests that the economy is getting ready to roll over and fall off a cliff.

Of course, Americans always want to do everything BIG.  So, if you have the money (or credit) and a very large truck, you can pull one of these babies down the highway:

Most of the RV’s I see, have two axles.  However, this one has four axles and more square feet than some small homes in older areas surrounding big cities.   Unfortunately, RV’s will be one of the first items that will go extinct in the United States when the domestic oil industry disintegrates.

Regardless, let’s get back to the drying up of the U.S. secondary gold supply market.

U.S. Gold Scrap Supply Declines To The Lowest Level In Recent History

According to the data put out in the GFMS 2017 World Gold Survey, U.S. gold scrap supply fell to a low of 58.7 metric tons (1.9 million oz) in 2016 versus a record 160 metric tons (5.1 million oz) in 2011:

What is interesting to see in this chart is that U.S. gold scrap supply in 2016 (58.7 metric tons) is nearly two and a half times less than it was in 2010 (143 metric tons) while the gold price was even higher.  Thus, Americans pawned off a great deal more gold in 2010 when the price was lower at $1,225 compared to $1,267 in 2016.  Which means, the U.S. gold scrap supply market is drying up.

This can be more clearly seen in the following chart below:

Not only has the U.S. gold scrap supply fallen 2.5 times from its peak in 2011, it is also less than it was in 2003 when the gold price was 3.5 times less.  Americans pawned 67.6 metric tons (mt) of gold in 2003 when the price was $363 on ounce.  However, with the gold price at a much higher level of $1,267 last year, U.S. gold scrap supply fell to a low of 58.7 mt.

Again, the data implies that the U.S. secondary gold scrap supply market is likely drying up.

As was stated in the beginning of the article, total U.S. gold scrap supply equaled nearly 1,000 mt from 2008 to 2016 (actual figure was 982 mt).   What is even more interesting, is if we compare U.S. jewelry demand versus gold scrap versus China & India.

When the gold price reached a peak of $1,900 in 2011, U.S. jewelry demand was 60.3 mt.  Again, this is the year U.S. gold scrap supply reached a record 160 mt.  We must remember, most of gold scrap comes from recycled gold jewelry.  Which means, Americans pawned 266% more gold than their gold jewelry demand in 2011.

Here are the 2011 Gold figures for the U.S., China & India:

2011 U.S. Gold Scrap 160 mt / 60.3 mt Gold Jewelry Demand = 266%

2011 Chinese Gold Scrap 144 mt / 547 mt Gold Jewelry Demand = 26%

2011 Indian Gold Scrap 58 mt / 667 mt Gold Jewelry Demand = 9%

As we can see, Americans pawned off 266% more gold than their annual gold jewelry demand in 2011, versus 26% for the Chinese and only 9% for Indians.  While some Chinese and Indians were selling their gold jewelry as scrap in 2011, the majority were holding on to it, especially in India.  Of course, this is no secret as India tradition is to build their wealth by acquiring gold jewelry.

Americans are in serous trouble as they have sold off the family’s gold jewels to go further into debt, while the Asians and Indians continue to acquire the yellow precious metal.  When the markets finally crack, very few Americans will be holding gold.  Unfortunately, the majority of Americans will see their highly inflated investments of STOCKS, BONDS and REAL ESTATE collapse while the value-price of gold skyrockets.

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40 Comments on "U.S GOLD SCRAP MARKET DRYING UP: Americans Pawned Off Their Best Asset To Go Further Into Debt"

  1. great post. thank you

  2. Great job as always Steve! Sooner or later the end of the road will come into view!

  3. You are the best Steve!

  4. DumnWesterners | May 2, 2017 at 8:13 pm | Reply

    Not as dumb as the Brits though. Double trouble Tony Blair and Gordon Brown decided it would be great idea to sell the country’s gold reserves in the late 90s at the wonderful price of less than $300.

    Brits don’t care about that silly yellow metal. After the financial crisis what did they do? The herd piled into antiques vases, antique cars, artwork etc. as a way to “preserve their wealth” while China has been using its designated gold plane to fly out all that barbaric yellow stuff to China.

    When they finally wake up and actually start to engage brain cells, they will find out maybe it wasn’t such a good idea to pile up huge amounts of debt while simultaneously getting rid of their ultimate insurance policy. At that point they will regret selling all their gold to China at ridiculous prices and allowing their gold vaults to become owned and controlled by Chinese state-owned companies. The herd will become desperate and probably pile into fake gold and silver bullion flooding in from China. The future generation have been screwed over so bad. I hope future historians name and shame the generation(s) who allowed this.

    • “I hope future historians name and shame the generation(s) who allowed this.”
      that’s unfair, don’t you think? blame entire generation(s) instead of responsible individuals? broad brush accusations only fuel generational strife, which aids and abets the “divide and conquer” strategists looting our nation. if the people you blame live in the same conditions as you, doesn’t that negate their culpability? look elsewhere. try D.C., Wall Street, Eccles Building… maybe the mirror? i fear we’re all falling short with the responsibilities of democracy. tea party, anyone?

      • DumnWesterners | May 4, 2017 at 9:05 pm | Reply

        It was a little harsh, I admit, though my opinion is it is well deserved. I do not withdraw that comment, even it includes myself as I am indeed alive today. There aren’t just one or two “responsible individuals” as you mentioned. This has only occurred because of mass acceptance. As was exactly the case with the 1990s bubble, the lead up to the financial crisis and the ridiculous situation we are in now. Sure the banks played a hand, but they were just the drug dealer who were created in response to what society wanted. As Edmund Burke once said, Evil flourishes when good people do nothing.

  5. The Bible says silver is money. Not gold. Gold is too illiquid to be money. The most important thing, the most valuable thing is liquidity. Value with high liquidity is found in silver alone. I hold a very small amount of gold but silver will be for most transactions, thus the most demand. Silver is backed by the Word of God. What more reason do you need?

    • Where I live in SouthAmerica South Gold is more liquid than silver, you just go to a money exchange and sell your gold coins (from the country), the spread between bid/offer is just 6%.In the case of silver there are also some places that buy silver but the price is ridiculous, like 20% below spot irrespective of any numismatic value.

      • I have pawn shops nearby who will offer me 80% of spot for an AGE. “No” is my answer. These are shops used to buying stolen goods to fund drug addictions, not honest buyers and sellers.

  6. It’s spread about in small amounts too. This weekend I accidentally bought some 14kt earrings super cheap at a sale, and picked up a playstation 3 off the curb which contains gold, neither amounts to much. Iron scrapping just went through a cycle of high prices as well. Looks like America generally losing interest in gold.

  7. But then why to sell their gold when they can use printed money , are they so dumb or they have other sinister plan ??!

  8. Brian Hines | May 3, 2017 at 5:56 am | Reply

    Hi Steve, I ran across this video and was wondering if you know this fellow. His presentation is in agreement with yours and explains in great detail about what you have been in fact saying all along. His name is Dr Nate Hagens. View his presentation here: https://www.youtube.com/watch?v=_hNi-7EjsH4

    A bit long but worth the time.

    • Brian Hines,

      Thanks for posting that. Yes, I know Nate for several years now as I am apart of two google groups, Peak Oil Discussion and Energy Transition. Nate is apart of that group. There are many engineers, scientists and professors apart of those two groups. Whoever posts an email in either of those two groups, everyone sees it and can respond.

      Ironic that you mentioned him, because Nate and I just recently enjoyed a humorous email response in that group.

      Nate is a very bright fellow with a good sense of what is going on.

      steve

      • Favorite Nate quote…

        “How much of our freedom is related to ‘cheap energy’? Last I checked, the average American uses over 60 barrel of oil equivalents of the 3 primary fossil fuels (oil, coal and natural gas) per year. Depending on ones assumptions (and occupation), this is in the neighborhood of hundred(s) of years of manual human toil supplanted by cheap ancient sunlight. (At $20 per hour, a human laborer makes over $40,000 per year so even an energy subsidy of 100X p/a equates to $4 million in dollar terms.) Do our social freedoms emanate from the nature of our socio-political system, or the reverse – is our socio-political system a byproduct of the resources we acquired and used after finding this land? What is freedom, anyways? And what will freedom look like in the future?”

  9. You are forgetting nuclear power. We have enough thorium to see our way through this now imminent crisis. All we need to do is to finish developing the technology necessary to take full advantage of this resource.

    https://youtu.be/bbyr7jZOllI

    • HenryR,

      Thanks for stopping by and leaving your comment. However, Thorium isn’t our energy savior as it takes the burning of OIL, NATGAS and COAL to extract the thorium, refine it, transport it, manufacture all the components to make the Thorium Reactor. Basically, it takes one hell of a lot of FOSSIL FUELS to make thorium power work. We don’t have much profitable oil left.

      There lies the rub.

      steve

      • If the USA had quit the VietNam war in 1970 and done a national project to perfect the Oak Ridge thorium burners for the purpose of making electricity and “waste” heat to run national-scale Fischer-Tropsch process to transform our HUGE supply of not-so-useful coal (this would be actual “clean coal” with the thorium being fissed instead of being a waste product to cause lung cancer) and ng (maybe, tar sands later)to syncrude and synDiesel (better than embargoed ZA could do in the 1970’s) as well as a bunch of even more valuable chemical precursors, we would be an industrial/energy exporter instead of running the biggest Multi-Ponzi scam the world has ever known.

        As it is, I think that they (TPTB) are working out a crash scenario that eliminates 90% of the population by their own hands or food unavailability. 10% remaining (500-700M global) would have plenty of work and lots of recycling to do. They are likely to be the “select” by way of modern eugenics.

  10. joe lindell | May 3, 2017 at 7:48 am | Reply

    When with Gold scrap “thing” affect the precious metals market? I hope
    you don’t answer “soon.” If it’s 10 years or longer them my answer is
    ” it is too soon” for this news to change my ivestment plans.

    • “When with Gold scrap ‘thing’ affect the precious metals market? I hope
      you don’t answer ‘soon.'”

      heh, how ’bout “never”?

    • This is not the time to invest. Its time to preserve.

      • Very good comment from dr. Tim Morgan, former head of research at Tullet Prebon and author of ‘The Perfect Storm’ and current developer of SEEDS; Surplus Energy Economics Data System;

        From his blog Surplus Energy Economics;

        I can see that I really am going to have to tackle the chaos/catastrophe issue!

        I’m still planning this, but here are some thoughts.

        First of all, we need to draw a clear distinction between the real economy (goods and services, labour and resources, but ultimately energy) and the financial economy of money and credit. Then, third of the trio, there’s politics, essentially an over-lay on top of these “two economies”.

        The easiest of these three, for me, is the financial economy. It’s out of control, heading for a crash. Though this will cause huge chaos, it’s not the end of the world. Since money has no intrinsic value, the financial system consists of “claims” on the real economy. We have created far more “claims” than the real economy can meet, so a lot of “claims” (i.e. the supposed value in money and credit) have to be destroyed. That is inescapable.

        Then, second-easiest, is politics. Whenever prosperity deteriorates, the public get angry, especially if the contemporary elite is arrogant, and/or greedy, and/or repressive, and/or detached from reality. On this basis, current elites are toast. This is what populism is really about. The incumbent elites could recover, but only if they make real reforms, and there’s no sign of that. So the elites go down, as does much of their wealth, and their neoliberal philosophy. NZ as a bolt-hole won’t work. The only destination that might work for them, as I see it, is Russia.

        The real and hardest issue is the real economy. Very simply put, this is flat – in aggregate. There is still real growth in China and India. Other economies (like America) are essentially static. Others again (like the UK) are in a crash-dive. The decline after plateau needn’t be too rapid – it depends how it’s handled.

        But the per capita real economy is deteriorating rapidly – basically, more and more people are sharing a total output that has stopped growing. Chinese and Indian citizens are still getting more prosperous, but less rapidly than their national economies. Prosperity in countries like Britain is falling rapidly. Elsewhere there is gradual erosion.

        • “Very good comment from dr. Tim Morgan, former head of research at Tullet Prebon and author of ‘The Perfect Storm’”

          if he doesn’t address the facts that the average white american taxpaying citizen is age 58, and that the dollar is a fiat debt currency, then he misses all the important points and his conclusions will be wrong.

          • gman,

            LOL…. you remind me of that guy in the school that no one really likes because all he does is ridicule everyone.

            I said in a previous comment that you were a GADFLY… I take that back. A GADFLY is one who drinks the host’s booze for free and offers enjoyable conversation and entertainment. So, in that vein… you’re not a GADFLY, but rather, a NAG.

            However, keep up the good work as you continue to motivate more comments and traffic… THANKS A MILLION.

            steve

          • “I said in a previous comment that you were a GADFLY”

            actually, you said I was a “GADLY”. twice.

            oh, and don’t forget to tell all your country friends what I said about most rural areas being economic banana republics, so you can all laugh together at how stupid I am.

  11. Wow! I just received an email from Tom Cloud. Silver is tanking to $16 and he’s trying to sell me 1 oz. Silver Philharmonic coins. Hasn’t he read your articles about peak oil, EROI, FIAT currency collapse, economic woes, eminent stock market crash? I surmise he is just a seller of silver not a buyer. He could give a rat’s butt where the price of silver is.His listeners are his customers, hopefully. If they lose money buying Tom Cloud’s advise, so be it. Hype and more hype. Talk about a con game, this guy is been at it for 30+ years or so.

    • “Hasn’t he read your articles about peak oil, EROI, FIAT currency collapse, economic woes, eminent stock market crash?”

      sure. but he needs money, and in this economy silver isn’t money.

      “Hype and more hype. Talk about a con game, this guy is been at it for 30+ years or so.”

      successfully so.

      • Steve provides excellent intel. How are you going to pay for that? Huh? Maybe he gets a few percent from Toms sales through SRS. So what, its a fucking 0,3% of all articles.

        Get a life assholes.

        😀

        You’re welcome.

    • Silver is a way to have some past buying-power preserved into the future. “Price” is what you pay now. “Availability” is also an issue. I wouldn’t advise anyone to go “all in” on one thing, especially a manipulated metal like silver, but it does seem a good deal if you can buy finished metal at a price lower than you could get it from the ground if you had a silver mine. 10-20% of your speculative/investment funds is not crazy as insurance to get some value away from the NYC markets and banksters.

  12. Steve,
    great article. I did not think a pickup could pull a trailer that big!!!

    So the supply of BLING BLING! is finally drying up? It had to happen sometime. As Americans get poorer, they have little money for BLING. In fact a desperate borrower will sell anything they can to raise cash. An American will do anything to raise cash to buy an Iphone or a new App for one. Part of the sales of BLING may be do to changes in fashion. 15 years ago, it was more fashionable, especially in big cities to wear BLING. Now carrying an Iphone and texting at all times is the new rage.

    Americans sold their gold before the crisis really hit. Maybe that’s smart. when the crisis hits no one will have any money to buy gold. I think it makes sense to buy gold and silver now while they are still available. however, this crisis when it hits will be devastating to all.

    The survivors will have to be healthy, have a good attitude, smart, skilled in practical things, have the basics available and be lucky.

    • “Americans sold their gold before the crisis really hit.”

      actually, looking at the chart it’s clear they were selling their scrap gold when it was $1700+ and before recent inflation, and have quite reasonably slowed down selling it at $1250 after recent inflation.

  13. I just sold all my pm’s and bought tesla stock! They came in with better than expected earnings I was assuming bankruptcy but they pulled it off.. Elon musk is a genius I know if I had a business that bled that much money I would’ve declared chapter 11 already. Can you imagine how much that stock will soar if they cut their massive losses in half??

  14. I have never thought of gold or silver as a path to wealth, merely a preservation of it. Once I buy, I give it no more thought than I do my home or car insurance.

    • +1. “The first rule of Fight Club is….”

    • Exactly. It’s not how much you can profit, but how much you can avoid LOSING, post-crash. The fact that this is the ultimate contrarian play (purchasing and sitting on PMs) doesn’t hurt either.

  15. Robert Happek | May 3, 2017 at 6:25 pm | Reply

    The sale of gold scrap may follow the price of gold. After reaching a peak in 2011-2012, the gold price declined to presently $1230 and change. Should the demand for gold increase again, the price of gold will rise and the sale of scrap gold will increase again. I remember that a few years ago in Europe, there were many shops advertising “We buy gold”. These signs disappeared with the falling price of gold. Cash is still king!

    Steve, when are you going to write a comprehensive report on the peak oil issue again ? We need a solid prediction when the global oil production from all sources (conventional and unconventional) will start to decline substantially.

  16. Steve, I just listened to your wall st for main st interview and it was excellent. I read the comments below and it was very positive and it showed more people are understanding the global predicament.

  17. silverfreaky | May 4, 2017 at 1:41 am | Reply

    When will you understand?The bonds are the key to PM.
    Inflation-interest rate.Forget all this crap about supply and demand.

    • “Forget all this crap about supply and demand.”

      heh. until after the crash, of course. then it’ll be “supply and demand” all the way!

      yes?

  18. Recreational goods and vehicles includes cell phones, computers, tvs etc. Recreational vehicles make up a very small %.

    Check out the price deflator for recreational stuff. Down for the last 120 consecutive qtrs. Chained dollars are much bigger than nominal dollars. It’s how BEA and Commerce Department fabricates real gdp and smashes cola for Americans.

    Entertaining article Steve but you should know more about BEA recreational data. Your comments are very misleading.

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