Why “Recycled Gold” Marketing is a Damaging Scam, Impeding Growth for Regulated and Certified ASM Gold

The term “recycled” often exudes an unquestionable trust in the minds of consumers, leading them to overlook traceability and transparency. Savvy marketers have exploited this trust, resulting in a convoluted scenario in the gold refining industry, which sees transactions amounting to billions annually.

Tracing the Roots of the Issue

In 2010, the U.S. Congress enacted the “conflict minerals” mandate, also referred to as Section 1502 of the Dodd Frank Act. This required U.S. publicly-listed firms to scrutinize their supply chains for specific minerals, including gold, that could be sourced from Congo or its neighboring regions. This led to an annual reporting obligation for these companies regarding the gold’s origin in their supply chain. Unfortunately, the gold’s point of refinement was deemed its origin, primarily due to the challenges of pinpointing the actual source in an industry notorious for its discreet operations.

A year later, in 2011, the OECD unveiled its Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. Though merely a guideline and not binding regulations, it did provide a foundation for sourcing gold directly from mining operations.

Before these guidelines came into effect in 2010, the gold refining sector functioned in an unregulated environment where traceability was often overlooked, and businesses operated on mutual trust.

Post-2010, a notable shift was observed. With the OECD laying out a clear path to trace gold to its mining source, major and intermediate mining entities adapted with relative ease. But, the statistics around ASM (Artisanal and Small-scale Mining) gold and recycled gold began showing an anomalous trend. ASM gold seemed to vanish from the yield processed by LBMA refineries, while the volume of recycled gold soared. Traditionally, mined gold, including both large and medium mining, made up 75% of the annual global yield, and the remaining 25% came from recycled sources, predominantly old jewelry. Within that 75%, large and medium mining operations contributed 50%, with ASM gold making up the rest.

By 2015, Swiss-based gold refineries started distancing themselves from ASM gold. The inherent risks associated with the informal nature of ASM, compounded by scandals emerging from regions like Africa and South America, made this segment of gold unattractive. With mounting regulations and an increasing emphasis on transparency and accountability for mined gold, refineries turned to recycled gold. This segment, with its lack of stringent regulations and indeterminable traceability, became a sanctuary for sourcing gold.

The OECD mineral guidance, combined with EU conflict mineral regulations and the RMI, has unfortunately misjudged the issue by treating recycled gold in the same vein as mined gold. This is problematic given the vast differences in their respective supply chains. While the mining process spans from artisanal miners to technologically advanced mining operations, recycled gold primarily operates through a sprawling network of pawn shops and cash-for-gold businesses. Moreover, the prevailing guidelines around recycled gold lack both logic and structure. From the perspective of the LBMA, virtually any gold that isn’t mined qualifies as recycled. This absence of precise definitions and standards paves the way for recycled gold to serve as a loophole to sidestep traceability, transparency, and accountability.

Even more concerning is the misuse of the term “recycled” within the industry. Given the inherent challenges in tracing the origins of recycled gold, gold from the highest-risk sources can conveniently be relabeled as “recycled.” Incredibly, freshly mined gold can be transformed into “recycled gold” in less than a fortnight, exploiting this definition’s ambiguity.

Downstream companies are lured by the narrative crafted by leading traceability standards like the RJC. By juxtaposing powerful terms such as “chain of custody” with “recycled gold,” an illusion of stringent traceability and sustainability is created. This “recycled” halo effectively erases any probing questions about the gold’s origins. This artful narrative, championed by top gold refineries and so-called “traceability” standards, consolidates the dominant position of recycled gold in the industry. With no shortage or premium attached to recycled gold, refineries can, in essence, conjure recycled gold, exploiting definitional grey areas.

Sourcing recycled gold is often touted as a responsible choice for several reasons:

Minimized Mining Impact: Many believe that the use of recycled gold reduces the need for mining. However, data from the past decade reveals an increase in mining despite the rise in recycled gold consumption. This is because of gold’s intrinsic monetary value and its cash-like behavior; it continues to be mined, unlike other industries where recycled materials don’t carry the same high monetary worth as gold.

Reduced Carbon Footprint: A prevalent misconception is that recycled gold has a smaller environmental footprint. However, given its untraceability, we can’t ascertain if this gold was recently mined or the conditions under which it was extracted. If, for instance, illicitly mined gold is craftily repackaged as recycled—a frequent practice—it might bear the weight of grave malpractices like child labor, mercury usage, and water contamination.

Affordability: Indeed, recycled gold has no premium because of its abundant availability, mirroring international market prices.

From a business viewpoint, recycled gold seems an ideal choice due to:

1.No additional costs

2.Lack of traceability

3.Absence of accountability

4.The favorable connotations linked with the term “Recycled”

Conversely, when discussing Certified ASM (Artisanal and Small-Scale Mining) gold, the offering includes:

1.Measurable positive social impact on miners

2.Transparency in sourcing

3.Accountability at every step

4.Reduced environmental impact

5.A value higher than recycled gold due to the social impact it represents

Tech giants and jewelry makers often lean towards recycled gold, with well-constructed narratives that exude a semblance of traceability and responsibility. To discern the hidden perils of relying exclusively on recycled gold, one needs deeper understanding. By sidelining ASM, they inadvertently obstruct earnest efforts aimed at bringing formality and structure to a pivotal sector.

Embracing ASM stands out as the most ethical gold sourcing route. Meaningfull change demands hard work, and disassociating from the ASM segment only prolongs its existing challenges, inhibiting genuine reforms. The onus is on tech behemoths and upscale jewelry brands to earnestly integrate ASM gold into their supply chains, rather than a mere token gesture. Such engagement can channel funds towards educating ASM workers, advancing technology, and completely eliminating mercury from informal ASM activities. Initiatives like Fairmined have been making strides in this direction since 2011, endorsing a grassroots approach that’s shown tangible results. Significant financial contributions to certified ASM miners motivate them to adopt regulated practices.

Note1:A comprehensive exploration of the technical criteria defining an ASM mine will be discussed in a future conversation, given its rising prominence in discussions on sustainability and to prevent it from turning into a marketing circus.

Note 2:As a community, it’s imperative for us to be actively involved in shaping the recently opened ISO definition of recycled gold. The very organizations currently spearheading this effort are the same ones that have contributed to the existing issues.