Montreal 21 September 2011: Reuters

Scrap gold sales surged by a third last month even as the metal's multi-year bull run turned into roller-coaster ride, while sales of recycled bullion bars continues to boom, a leading metals refiner said this week. Bill LeRoy, president of Ohio Precious Metals LLC, told Reuters at this week's London Bullion Market Association's conference that his brisk business of melting pieces of gold scrap into marketable investment products had already exceeded his expectations, though he didn't expect the boom to run forever.

"We are making more investment bullion products than ever before," said LeRoy. "We are pleasantly surprised...as we thought by now we may start to see some slacking in our investment bullion business," he said.

His comments provide a deeper insight at a crucial junction in the global bullion market, where the flow of scrap jewelry, electronics and other physical sources of gold are converted into 400-ounce bars to be stored in bank vaults by investors seeking a dollar hedge or haven from instability.

That reputation for safety has come under pressure over the past month, as prices lurched up and down amid some of gold's most volatile trading days on record. Gold hit a record $1,920.30 an ounce in early September, but has since eased.

Meanwhile, inbound scrap gold volume to OPM rose 30 percent in August compared to the average monthly flow in the first half of the year, nearing the record high levels he saw in late 2009, LeRoy said.

That surge reverses the relatively weaker scrap sales seen in the first part of the year, which he said could be a sign that fewer and fewer people have any gold left after the boom of the cash-for-gold industry. Scrap gold supply tends to rise as the price of gold increases. However, the metal's decade-long rally has dried up availability of scrap.

MORE PRODUCTS, NOT MORE REFINING

LeRoy said its outbound sales are so encouraging that he is planning to expand that business next year with the launch of new gold bullion products to meet market demand. OPM, one of a handful of large U.S. precious metals refiners, offers bullion bars with the OPM name, the recycling symbol with the words "From Recycled Sources" stamped on them. It also produces recycled gold and silver grains.

Jewellers, whose business are suffering from a double whammy of near-record gold price and increased volatility, are not as strong buyers compared to his investment business, LeRoy said.

OPM processes everything from old gold jewelry and used electronics components into one-ounce, one-kilogram and 400-ounce pure to near-pure "green" gold bars and gold grains that are shipped in security canvas bags and crates to investors nationwide.

But the firm has no plans to further expand its gold refining capacity for fears that scrap gold volume could disappear when bullion prices eventually fall, LeRoy said. LeRoy said the inbound volume of scrap silver was still twice as high from the same period last year, and has showed no signs of slowing since the start of this year.

Since January, the Jackson, Ohio-based company has revved up his refinery to run 24 hours a day, seven days a week. It has been managing the abundant scrap silver flow by assigning quotas to customers, essentially turning away business, to meet commitments to its long-time clients. LeRoy said the the entire silver refining industry does not have a lot of room as of now.

Asked if the influx of recycled gold and silver supply will weigh on prices, he said "At some point prices are going to drop, and when prices drop, it's going to be more because of investor mind-set rather than supply/demand issues."

Ends --

Reuters - for Commodities Now