Where Does Gold In Jewelry Come From?

By Patrick Schein

Introduction:

This was written in response to a comment written in response to my previous post on 60 Minutes.

In the Comments for this, “Stephen” wrote,

“First of all: all the gold for the jewellery comes from refined gold = 100% green…”

Patrick Schein, who is an expert on these matters, was kind enough to set the record straight. I thought that his comments deserved wider attention than simply a comment on an article, so I have posted it separately here.

Patrick is a metal trader, refiner and board member of the Alliance for Responsible Mining (ARM.) His area of specialty is ethically sourced gold from the artisanal mining sector.

~Marc Choyt, Publisher

All of the gold for jewelry is refined. The gold coming from mines (what is called primary sources) and gold from scrap jewelry, reformed ingots or coins, electronic scrap,etc..(secondary sources) all comes from refined source.

(Artisanal Mining for Gold — Courtesy Greg Valerio)

Refining is just a stage in the process. It does not validate whether the unrefined gold coming in is from a “green” or responsible origin or not. It just takes the unrefined gold and transforms it into fine gold, suitable for any use. Refined gold or fine gold does not mean “green”.

Regarding the electronic industry gold use, the numbers from the WGC (World Gold Council) are very clear. In 2008 the electronic gold demand (WGC) accounted for 1.7M ounces in the US and 9.4M worldwide.

Compared to the jewelry consumption, its represents 30% of the jewelry demand for the US and only 14% world wide.So gold use in the electronic industry is far from being the first and only gold used in jewelry manufacturing.

In 2008 jewelry demanded 69M ounces of gold and the mining output produced 78M ounces. So the jewelry world demand is quite similar to the mining offer.

(Courtesy ARM and Patrick Schein)

In the US, the mine production in 2008 was 7.5M oz for a jewelry demand of 5.8M. Mining sources could cover 130% of the jewelry consumption.

Lastly, the paper gold is in fact named ETF (Exchange Traded Funds). This “paper” is in most cases backed with physical gold. In fact, the certificate has physical collateral in a safe. It’s a practical way for investing in gold.

In 2008, the total twelve biggest funds grew by 10M ounces. This represents only 8% of the total physical gold offer for the same year and only 2% of the total above the ground stocks of gold.

Regarding DRC, I agree there are problems in that country and everybody is aware of it.

(Patrick in Atacama desert in Peru amalgamating some ore)

To conclude, we could say that the main demand for gold is jewelry and its main offer is mining. So if you want to buy an ethical gold jewel to your beloved, you must make sure that the gold was produced in a responsible manner.

Let’s have a positive approach. In every country you have positive and responsible initiatives and if not, you can always find an organization that has the willingness to change things. Support them and encourage their action because artisanal mining can be responsible. To be convinced see: http://www.communitymining.org

Patrick SCHEIN
S&P TRADING
Precious metal trader & Refiner

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