Following Russia’s invasion of Ukraine earlier in the year, it has become increasingly difficult to obtain raw materials such as diamonds and gold for makers of luxury watches and jewelry. Data from the World Gold Council show that Russia is the largest producer of natural diamonds globally, as well as the second-biggest miner of gold in the world.
Earlier in March, the Cartier maker stated that it had not been purchasing diamonds mined in Russia, reaffirming in its recently released sustainability report that it wasn’t purchasing recycled gold from the Eastern European country either. Recycled gold is under investigation currently as it may contain gold of suspect origin, which is a big issue since companies are currently focused on addressing human rights issues in supply chains.
Last month, Swiss stated that an increase in gold imports from Dubai raised suspicions over whether gold from Russia was being sold via the Emirate nation. However, no evidence was found to back these claims.
Argor-Heraeus, a Swiss gold refinery, has also not bought gold from Russia since Ukraine’s invasion in February, with its CEO, Robin Kolvenbach, noting that one could assume that Russian gold also ended up in value chains in the West via Dubai. The media office of Dubai’s government is yet to respond to a request for comment by media outlets.
Patek Philippe, a family-owned watchmaker, stated that it trusted the rules set by the government for the sourcing of raw materials as well as its suppliers while Rolex revealed that it had established its own gold traceability system. Rolex added that it was currently focused on the development of its own diamond certification model, which would require that its suppliers reveal the origins of every batch.
In its 2021 sustainability report, Swatch Group stated that the lack of gold’s traceability to mines was the primary reason why it didn’t use recycled gold from external sources.
Additionally, Berangere Ruchat, the sustainability head for Richemont, revealed that the company possessed the experience as well the tools that enabled them to know the origin of its raw materials. Richemont currently sources more than 90% of its gold via Varinor, its in-house refinery. Varinor focuses on old jewelry from Japan, Western Europe and North America or recycled gold with industrial origins.
The Responsible Jewelry Council is currently used by most luxury watch and jewelry companies to certify the origins of recycled gold. The council’s strictest standard for determining a material’s source is the Chain-of-Custody.
The shortage of gold supplies needed by jewelers suggests that gold extraction companies such as Royal Gold Inc. (NASDAQ: RGLD) are enjoying a high demand for their products, and company shareholders are likely to reap decent returns as the demand for gold continues to rise.
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