Urban Mining Gains Momentum in Japan: Examining the Boom Amidst Rising Gold Prices

As gold prices continue surging on an international scale, governments around the globe are coming up with creative ways to capitalize on the opportunity. While Japan may have minimal natural gold resources, the nation has come up with a more innovative gold extraction approach. Urban mining factories in Japan are extracting the yellow precious metal from used circuit boards and other pieces of electronic waste for gold recycling profits.

Numerous factories in Japan convert thousands of tons of scrap metal per year into usable products, like new cell phones. Various electronics offer gold recycling opportunities, including circuit boards, electric vehicles, and nearly any product that contains SIM cards. Gold provides premier electrical conductivity qualities while also being ductile and malleable, making it the preferred metal for various electronics, including NASA’s satellites.

One urban mining factory in Hiratsuka, Japan, recycles mounds of circuit boards and jewelry each day. The factory melts down the metal and gold scrap before re-shaping it into new forms of bullion, jewelry, or other products. Each year, the facility recovers over 3,000 tons of materials.

“We want to expand waste collection not just in Japan but also in ASEAN, where demand for electronic recycling is expected to grow,” Akio Nagaoka, the factory’s manager, explained.

As conflicts in the Middle East continue worsening day by day, gold prices have surged near all-time highs. As a safe-haven asset, people flock to gold when geopolitical tensions and inflation run high. On October 27, gold futures hit a five-and-a-half-month high and have only continued to exceed this record since.

In the last month, gold futures have increased by 3.04%. As of November 29, gold futures have broken the yearly trading high, closing the day at $2,064.70 per ounce. The precious metal is now trading at multi-year resistance levels, just a few dollars below the record-high achieved in 2020 of $2,069 per ounce.

“The volatility in gold prices has increased significantly, and the yellow metal has given strong returns in the past few months. We remain bullish on gold and expect the prices to hit new highs of around $2,240 if the volatility continues. We also anticipate the prices can reach $2,400 next year if the fundamentals remain strong,” Ajay Kedia, a Director for Kedia Advisory, explained.

Given the potential for gold, it makes sense that gold recycling has gained popularity in recent months. According to the World Gold Council, the global supply of recycled gold increased by 10% to 923.7 tons during the first nine months of this year. For reference, mine production rates only grew by 3% during the same period.

Recycled gold levels are quickly approaching the decade-high achieved in 2020 of 1,293.1 tons. 2020 was a phenomenal year for gold performance amid the economic chaos that occurred during the COVID-19 shutdowns, spiking safe-haven gold demand. We’re seeing similar patterns repeat in 2023 as inflation reaches critical levels and the war in the Middle East threatens nations worldwide.

Gold recycling is such a prominent aspect of the industry because only around 200,000 tons of gold have been mined throughout human history. Nearly all of this gold is still in circulation today, as recycled gold makes up about one-third of the total global gold supply. As mine production yields mediocre results, the gold industry relies on urban mining factories to convert old appliances, outdated smartphones, and scrap metal into useful products.

With the urban mining industry booming, major players are ramping up their production rates. Mitsubishi Materials, for example, currently processes around 160,000 tons of scrap metal per year. By the end of fiscal year 2030, the major urban mining factory hopes to increase its production to 240,000 tons.

According to the Sustainability Design Institute, Japan currently contains around 5,300 tons of gold, or approximately 10% of the world’s reserves. Every ton of gold offers 280 grams of recoverable materials, which can be converted into 10,000 mobile phones.

Compared to traditional mining practices, urban mining is 56 times more efficient in terms of weight, according to Japan’s Environment Ministry. Urban mining practices are also far more sustainable, environmentally friendly, and less harmful to surrounding communities and workers.

Because of these benefits, the Japanese government is fully on board with supporting urban mining and has already enacted numerous programs that ensure its supply, such as limiting e-waste exports. As gold performance rates continue excelling, we can likely expect further innovative developments in the urban mining industry coming soon.

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