Gold scrap supplies probably exceeded 500 metric tons in the first quarter, about the same as global mine production, researcher GFMS Ltd. said. Scrap supplies will be “much lower” in the second quarter unless prices rise “aggressively,” GFMS Chairman Philip Klapwijk said today in a presentation in Zurich. Scrapping will expand this year after jumping 27 percent to a record 1,218 tons in 2008 as higher prices encouraged sales, GFMS said this month. “We had a perfect storm for scrapping in the first quarter” because of distressed selling for economic reasons and inventory disposals by some jewelers, Klapwijk said in an interview after the presentation. “We need much higher prices to sustain that rate of scrapping.” Gold for immediate delivery traded at $899.35 an ounce as of 12:32 p.m. in London today. The metal reached a record $1,032.70 in March 2008 and has gained the past eight years. Klapwijk reiterated GFMS’s forecast this month that gold may reach a record this year as demand for a hedge against inflation outpaces the expanding scrap supply and weaker consumption by jewelers. He also said the metal may fall to the low $800s before then. Bullion, which is trading 11 percent below an 11-month high of $1,006.29 set in February, dropped to $864.97 an ounce on April 17, the lowest in almost three months. “I’m not convinced we’re out of the woods yet,” Klapwijk said. “We might see a drop again over the next few months. That would be a tremendous buying opportunity.”

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