First and foremost, it’s highly important to create a basic flowchart outlining the supply chain of recycled gold. This visual representation will reveal a wealth of information efficiently. You’ll soon realize that recycled gold primarily comes from pawn shops and cash-for-gold programs, which are integral to the functioning of gold refineries.

This flowchart shows the role of pawnshops and cash for gold.

Armed with this vital information, it’s imperative to directly approach the origin. In the case of recycled gold, it’s virtually impossible to trace its mining origins or the conditions under which it was extracted, leaving uncertainty regarding the use of child labor or mercury in the process. The origin of this “recycled” material lies in where individual sellers exchange their used or broken jewelry, typically through pawn shops and cash-for-gold schemes.

What are the risks from sourcing gold from pawn shops and cash for gold schemes ?

  1. Pawn shops and cash-for-gold schemes typically have minimal Anti-Money Laundering (AML) measures in operation, and professional risk assessments are rarely conducted. Moreover, there is often a lack of corporate governance within these establishments.
  1. In regions where illegal gold extraction is rampant, there’s a significant likelihood that this illicitly obtained gold finds its way into the stream of recycled gold. This can occur in two primary ways: Firstly, pawn shop owners may knowingly purchase illicitly extracted gold at a reduced price, fabricating documentation to conceal its origin. Secondly, illicit actors may refine the gold, create alloys, manufacture basic jewelry pieces, and sell them to pawn shops, often employing individuals to pose as sellers of their own used jewelry. Gold acquired through illegal means is often sold at a lower price because it cannot be sold through legal channels. Consequently, the only route to launder this unlawfully sourced gold is through the recycled gold market.
  1. The majority of stolen jewelry from individuals and jewelry stores ultimately finds its way into the extensive network of pawnshops and cash-for-gold schemes that are widespread globally.
  1. Typically, these commercial establishments engage in predatory lending practices, imposing interest rates that are impossible to repay. They target individuals in need of financial assistance who may have limited understanding of financial matters.
  1. Most transactions at these establishments are conducted in cash, often without requiring identification, making it nearly impossible to trace these deals back to the individual sellers. Pawnshops that attempt to implement stricter practices will quickly be pushed out of business, as the nature of these establishments is to operate as discreetly as possible, mirroring the practices of their European buyers.

How illicitly sourced gold is transformed in to recycled gold.

  1. A gold dore bar from illegal extraction is first assayed. After determining its composition, these actors calculate the amount of silver and copper needed to create an 18k or 22k alloy and then smelt the bar to produce a new recycled gold bar. The equipment required for this process can be easily purchased on Amazon for around $250. [View link below]
  1. A gold dore bar from illicit extraction is artisanally refined with nitric acid in a glass beaker, removing all mineral traces that could indicate its ground origin. After purification, these actors calculate the amount of silver and copper needed to create an 18k or 22k alloy, then smelt the bar. They use the casting method to produce rudimentary pieces of jewelry, colloquially known as “elephant gold.” Once these large gold jewelry pieces are made, they pay individuals to pose as the original owners and sell them to various pawn shops, which often have minimal identification requirements and only deal in cash. The equipment for this process includes a smelting furnace available on Amazon, along with additional items such as a glass beaker, a vacuum caster, and a dewaxing furnace, costing no more than $1,500 USD in total.[View links below]

People often assume that refining gold is a complex procedure, but it’s actually simpler than it seems. You can watch the video linked below, which shows someone refining gold and removing its trace elements using only nitric acid. The process doesn’t even require electricity—the person uses a coal oven, and the operator isn’t even wearing shoes. There are many resources on YouTube explaining how to refine gold artisanally. Refining gold is very easy and cost-effective, with the expenses totaling less than 0.003% of the gold’s value.

Step by Step Procedure to Refine Gold

The recycled gold supply chain primarily involves smelted recycled gold bars, which completely erase any physical evidence that the gold originated as jewelry. This means the only proof of origin is documentation. The challenge arises because in poverty-stricken countries, there is a strong economic incentive to forge these documents. As a result, melted recycled gold bars that have only paperwork as evidence is the riskiest source of gold in the market. It’s essential to be wary of these supply chains and to create a flowchart that outlines each stage of the supply chain and the physical form of the gold at each point.

The methods outlined above make it incredibly challenging to prevent illegally sourced gold from being transformed into environmentally conscious, carbon-neutral recycled gold. In fact, this represents the most detrimental form of gold sourcing, with irreversible environmental impacts. These illicit actors resort to using mercury despite its prohibition due to its practicality and cost-effectiveness. Moreover, they often exploit child labor and subject workers to deplorable conditions.

We urge the luxury and tech sectors to acknowledge these illicit activities. Refineries fail to transparently communicate the source of their recycled gold and its associated risks, Conveniently excluding its origins from pawn shops and cash-for-gold associations, instead labeling them as scrap collectors. By turning a blind eye to these risks, many publicly traded and luxury companies inadvertently finance severe environmental and social crimes under the guise of “recycled” gold.

Representatives of these companies must awaken to the reality of their actions and take responsibility for the consequences.

Here is a list of equipment available on Amazon for artificially creating recycled gold bars:

"Assesing risk of recycled gold from refineries"