Recycled gold is the quiet ceiling on this rally

Roughly a quarter of annual gold supply comes from recycling, the fastest-moving lever in an otherwise glacial supply chain. Unlike mine output, it responds to price within weeks, concentrated in markets with deep household holdings and accessible refining: India, Turkey, Thailand and southern China.

Each sharp rally therefore triggers a supply response that mine schedules cannot provide, which is one reason gold rallies flatten faster than the demand data alone would suggest.

The speed of this supply response is structural rather than cyclical. Household gold in these markets is typically held in jewellery form with minimal numismatic premium, meaning it can be sold back into the refining chain at close to metal value with little friction, unlike, say, coin collections or industrial inventory that carry switching costs.

Scrap flows have been weaker than the price level implies. Households in the major recycling markets appear to be holding, either expecting further gains or hedging domestic currency weakness.

If that reluctance breaks, the near-term supply response could be substantial. It is the most underweighted risk in most bullish 2026 forecasts.

There is a competing explanation worth weighing: in several of these markets, currency depreciation against the dollar has been significant enough that domestic-currency gold prices have risen even faster than dollar prices, which would normally accelerate scrap selling, not suppress it. That scrap flows have nonetheless lagged suggests households may be treating gold increasingly as a long-term store of value against currency risk rather than as a liquidity buffer to be sold opportunistically, a behavioural shift that would be more durable than simple price-level reluctance.

Local premia and discounts to the London price in India and China are the highest-frequency indicator available. A persistent discount signals domestic selling into the international market, which is the recycling response arriving.

A sustained discount in Indian and Chinese domestic prices relative to London, persisting for several consecutive weeks rather than a single data point, would be the clearest confirmation that the withheld scrap supply is finally returning to the market. Until that appears, the bullish case retains an unresolved supply-side risk that most forecasts continue to underweight.