Towards Transparency: Gold Industry Predictions and Challenges for 2035
Welcome to my inaugural blog of the year. The holiday break provided a much-needed chance to relax and organize my thoughts. As we delve into the new year, the gold industry stands at a pivotal juncture, grappling with an increasing call for traceability and transparency.
In a market where information is often elusive, it’s noteworthy that companies and clients are taking the lead in driving this transformative change. However, gazing into the crystal ball toward 2035, I find myself hesitant to set an overly optimistic timeframe for 2030. The gold refining sector, along with certain technology and luxury companies, faces formidable resistance in fully embracing the principles of traceability, accountability, and transparency. Overcoming these challenges will undoubtedly be a significant task on the industry’s journey toward a more responsible and transparent future.
In outlining my predictions for the future market, I propose a categorization of gold sourcing into three distinct realms: recycled/reprocessed gold, ASM (Artisanal Small-Scale Mining), and LSM (Large-Scale Mining).
Recycled gold/Reprocessed gold
A favorable atmosphere is developing for a shift in the terminology associated with recycled gold within the industry, a term that has often been misused and exploited by numerous refineries, retail jewelers and technology companies . A proposal is underway to replace the term with “reprocessed gold,” which offers a clearer and more precise designation. Defining terms accurately marks the initial stride on the lengthy path toward establishing transparency and traceability in this controversial supply chain.
Establishing traceability for recycled/reprocessed gold poses a formidable challenge, given its origin from millions of individual sellers who trade their post-consumer used jewelry. These items are then sold or pawned to hundreds of thousands of pawn shops and cash-for-gold schemes globally. For practicality, it becomes crucial to pinpoint the origin of recycled/reprocessed gold at the pawn shops, which constitute the riskiest segment of the supply chain. Standards must account for these establishments, and the discourse should involve multiple pawn shop associations.
Illicitly sourced gold often finds its way into the market through the utilization of recycled or reprocessed gold, as it provides an avenue lacking traceability. The ease with which recently mined gold can be refined into a 24-karat bar allows for the complete erasure of its mineral footprint. Subsequently, this gold is skillfully casted into rudimentary jewelry pieces. Controlling this situation becomes challenging, particularly as the costs associated with such transformations do not exceed 0.7% per gram of the gold’s overall value.
Currently, all recycled gold standards conveniently designate the origin of recycled/reprocessed gold at refineries, conveniently overlooking pawn shops and cash-for-gold schemes in the ambit of auditing standards. Adjustments should be made to rectify this oversight and include these critical players in the overall standards framework.
Reprocessed gold predictions for 2035
The task of tracing the origin of reprocessed gold has become an insurmountable challenge, primarily due to resistance from pawn shop owners and cash-for-gold schemes reluctant to establish comprehensive Know Your Customer (KYC) and Anti-Money Laundering (AML) policies aimed at risk reduction. With the general public well-informed about the untraceable nature of this gold, it is expected that such gold will be designated as having an undetermined origin. Consequently, any claims regarding traceability, transparency, and carbon offsetting will be rendered void.
The general public is acutely aware of the inherent risks tied to engaging with this category of gold. These concerns range from the possibility of acquiring stolen items to the utilization of recently illegally extracted gold that has been skillfully transformed into jewelry. Additionally, there is a heightened awareness of the potential involvement of such gold in money laundering activities, making individuals cautious about its sourcing and impact on ethical practices
While there have been isolated cases of successful traceability initiatives in Europe, particularly stemming from pawn shops and cash-for-gold establishments, these endeavors are likely to encounter formidable challenges. The competition arises from pawn shops that lack stringent Know Your Customer (KYC) procedures and robust Anti-Money Laundering (AML) policies. Consequently, a significant portion of this particular type of gold tends to be directed towards destinations where considerations of traceability and ethical sourcing are not prioritized.
In the past few years, ASM (Artisanal Small-Scale Mining) gold has garnered significant attention as a socially responsible source of gold. This sector is positioned to be the new ecotheater. The pragmatic pursuit of generating substantial ASM gold encounters concerns, primarily due to loose definitions. Currently, there is a lack of clarity regarding what qualifies as an ASM mine, and the absence of firm definitions raises apprehensions. Given the recent emphasis on this topic, comprehensive and precise definitions are yet to be established.
For instance, in Colombia, a small mine is restricted to processing 15,000 tons per year, whereas in Ecuador, the limit for a small mine is set at 100,000 tons per year. Engaging in meaningful discussions is essential to establish criteria, taking into account variables like water usage and the workforce size in each mine. It is of utmost importance to prevent the mislabeling of mines, as there is a risk of fraud in categorizing those that are actually medium or large operations as ASM
The optimistic aspect is that with increased transparency, active discussions can be fostered to establish responsible criteria and precise definitions for ASM mines.
Traceability and transparency are poised to become the industry standard, as exemplified by Breitling under the leadership of Aurelia Figueroa. She swiftly and unequivocally altered their sourcing strategy, recognizing that ASM (Artisanal Small-Scale Mining) gold represents the most socially responsible source in the market. Rather than heading to the gold refinery, she directed her focus to the core, where genuine impact is made—the Touchstone Mine in Colombia.
In this sourcing model, the gold refinery loses its once tightly held control, rendering it irrelevant. With heightened traceability and transparency comes accountability, demanding constant vigilance to ensure the mine adheres to legal obligations and follows the best environmental and labor practices. Multiple on-site visits and audits become the norm. This transparency not only brings out the best in all participants in the supply chain but also enables Breitling to impart their top-tier knowledge on updated labor, environmental, and carbon measurement practices to the Touchstone Mine.
It’s a mutually beneficial arrangement, steering away from the customary practices of confidentiality and secrecy prevalent in the gold refining industry. These practices, often devoid of meaningful change for gold mining countries, are replaced by a win-win situation. The gold sourced from such responsible mines is anticipated to witness a surge in demand, especially considering the limited number of legal ASM mines worldwide
ASM gold predictions for 2035
Precise criteria and definitions will be established to clearly identify what constitutes a small mine, taking into account factors such as the volume of material moved (measured in tons), water usage, and the size of the workforce in each mine. The majority of ASM (Artisanal Small-Scale Mining) operations will adhere to robust standards, subjecting themselves to third-party audits that ensure segregation from other sources of gold. Each mine’s carbon footprint will be meticulously determined.
Certified gold from these mines will see a departure from price determination linked to the LBMA (London Bullion Market Association). Instead, a distinct pricing mechanism will be introduced, reflecting the demand and supply dynamics—similar to the method used for establishing the spot price of premium coffee. This approach aims to create a transparent and independent pricing structure for ASM certified gold, detached from traditional market influences. The market values traceable, certified ASM gold more than untraceable, uncertified gold because of its transparency, ethical assurance, and the heightened worth associated with its scarcity.
Acquiring gold from large-scale mining operations may contribute to adverse effects such as deforestation, habitat destruction, soil erosion, and water source contamination. Additionally, it could result in the displacement of local communities, disrupting their livelihoods and cultural practices. These consequences have the potential to trigger social unrest and negatively impact the overall well-being of the affected populations.
Betts Group’s SMO (Single Mine Origin) gold is taking a leading role in emphasizing traceability and accountability within its supply chain. Should any adverse situations arise concerning human rights, displacement of local communities, labor practices, or environmental impacts, the company is dedicated to promptly addressing these issues. The unrestricted flow of information guarantees that such matters are not just recognized but are actively addressed, contributing to the ongoing improvement of their supply chain
LSM gold predictions for 2035
By 2035, most Large-Scale Mining (LSM) gold mines are anticipated to adopt rigorous standards, ensuring responsible practices. Their reports will meticulously detail environmental impacts with transparent disclosure. Social programs will be openly communicated, and an ongoing dialogue will be established to assess social and environmental impacts with local communities and concerned groups. Transparency and accountability will be central, providing consumers with comprehensive information about the effects of large-scale mining processes on the environment and communities. This wealth of information will empower consumers to make informed decisions when considering products associated with this gold.
The transformation spurred by technology and the unrestricted flow of information is inevitable. While the exact timeline remains uncertain, the rapid pace of global change reinforces my strong belief in its inevitability. In this evolving landscape, addressing the untraceability of recycled or reprocessed gold is imperative. It’s a conversation that cannot be sidestepped.
Explicit disclosure becomes crucial, particularly in identifying the origins of gold within pawn shops and cash-for-gold establishments, which inherently pose sourcing risks. The dialogue surrounding this matter is unavoidable. Moving forward, the establishment of premiums for gold with traceable roots, adhering to robust standards that guarantee segregation, is poised to become the industry norm in the coming years.
However, it’s essential to acknowledge that traceability in the gold refining sector is currently a luxury not accessible to many. This prompts a necessary shift in mindset. The adoption of standards that prioritize both environmental and social well-being throughout the entire supply chain is paramount. The Fairmined standard stands out as a trailblazer, raising the bar for excellent practices and paving the way for a sustainable and responsible future in the gold industry.