Industry

Gold Market – General Information

According to the 2007 US Geological Survey (USGS), the US uses approximately $9.85 billion of metal value in gold each year, of which approximately $7.88 billion in metal value is utilized to make jewelry. There is a shifting market trend, recycling versus mining, slowly taking place in the global precious metals market. The trend is noteworthy because the total known volume of gold mined and refined throughout history is only approximately 8,000 cubic meters, or a cube approximately 20 meters per side – a footprint slightly larger than half a basketball court --, and weighing 158,000 tons. Another measure sets the total volume of mined gold as approximately filling two Olympic-size swimming pools. 75% of this total volume has been mined and refined since 1910, and 50% since 1960. In sum, much of the gold in circulation today has been in circulation for some time and recycling is and has been a growing and significant component of gold consumption.

Mining costs have escalated due to significant increases in fuel, energy, labor, and transportation costs. Additionally, global environmental regulations specific to the mining industry have become increasingly stringent over the last decade. One of the results has been a decrease in overall global output in many precious metals derived from mining operations even though demand for precious metals remains constant or has increased (dependant on metal type). Couple this with overall market conditions, a current deep economic recession, and standard supply / demand curves, and it becomes easier to understand why precious metal prices have increased significantly over the last 12 months.

The United States Geological Survey (USGS) tracks precious metals utilization, output, and overall sector utilization on an annual basis. The trend line provided by the USGS in their 2007 estimates shows a clear percentage increase in recycled precious metals versus newly mined precious metals, as source material for a variety of industries.

For example, the USGS stated in their 2007 estimates that gold from recycled sources equated to 90 tons, or approximately 47% of reported United States consumption. This indicates a domestic market of around $3 billion annually in recycled gold. Mined gold equated to approximately $5.1 billion, creating total estimated combined market of $8.1 billion in “new” gold entering the domestic market. Estimated uses were jewelry / arts 84%, electrical /electronics 8%, dental / other 10%.

The USGS further reported an even starker contrast regarding silver. In 2007 United States domestic silver production equated to approximately 1,200 tons from the ground (traditional mining). This compares thoroughly 1,600 tons derived from recycling. This indicates a domestic market of around $1 billion annually in recycled silver, and approximately $750 million in newly mined silver, equating to a domestic market of $1.75 billion for 2007.

Between these two recycled precious metal categories, the gross estimated market value is around $4 billion in the United States annually and growing. For newly mined gold and silver, the United States market value is around $5.85 billion. Total market estimates combined places the domestic consumption market at $9.85 billion annually.

In our primary segment, we recycle old and broken jewelry. From along term standpoint, and with gold and silver as the primary foundation for domestic jewelry production, the USGS figures provide a strong indicator for our future basis for “raw material” inflows. Over 80% of available gold and silver consumed in the United States annually is utilized in the production of jewelry and related artistic items. By and large these items are sold to general consumers. A subset of these items will become “old,” unwanted,or broken each year. We give those consumers a method to onetime those assets,while also providing the resulting recycled material back into the overall market.

These calculations only describe the newly purchased / sold materials (jewelry and associated items) that enter the consumer market each year. However, the overall number of consumer-purchased items in total circulation increases each year as new items are produced and enter the market. This additional potential inventory spans the entire physical life of that individual consumer.

Another unavoidable fact: Over the lifetime of an individual consumer, 100% of their precious metal items purchased will be passed to another party. Much of this will be passed onto other family members; the balance will be sold into the secondary markets where Precious Metals Exchange Corp. intends to serve as an intermediary between holders, refiners, marketers and consumers.