Gold industry affected as world market prices decrease …

Mar 23, 2014 News

---

Pawn shops, brokers affected by falling prices in gold

By Kiana Wilburg
With the falling prices in gold, some of our pawn shops and brokers have been struggling to stay afloat. And there has been much speculation about when the valuable metal will rebound to its high prices.
In fact, some of the representatives of several pawnshops complained of the fear of bankruptcy as recovering the money they lent is now a harder challenge.
The situation has even forced some pawnshop owners to consider exploring other viable avenues as the situation does not seem to be changing anytime soon.

The pawnshop has served many as a convenient means of getting a quick loan without the hassle of filling too many forms. One’s credit history does not even come into question.
But the pawnbrokers are not the only ones that are affected by the falling prices. A wide cross section of the commercial industry has complained about the economic strain it has placed on some businesses to maintain its profitability while struggling to avoid huge losses.
A number of the local pawn shop managers and representatives who spoke with this publication yesterday asked that their names be kept anonymous.
Nonetheless, one representative of a pawnshop said that their business has been on a serious decline since the beginning of the year.
He added, “When a customer comes to a pawn shop is to do one of two things; pawn jewellery in exchange for a loan or sell it. In order to buy the gold jewellery you need a license and we don’t have that so we only offer the first service.
“We give our customers up to a certain time to pay back for the item after we have valued the item. Now when we have this item in store, and the client fails to honour the terms of the agreement, we are forced to sell it so that we can recover the money we lost.
“Now I don’t know about the others but when gold was expensive, business was good. We could have afforded to give customers an increased or better loan for their item but now that prices have fallen we can’t do that.
“Some clients don’t hold up their end of the bargain and what you find is that we can’t even recover the money we lent because of the plummeting gold prices. Plus the uncertainty as to when this will improve is an added stress. Customers end up looking for the next pawnshop that can give them a little more than we do. It’s hard.”
A manager of another pawnshop in Georgetown said, “I don’t want to go into details but all I can say is since the beginning of the year we have been unable to maintain the profits we had last year.
“I don’t want to go into how much we made but what I can say is that we have declined by 20 percent in terms of profits we normally make and it is because of the falling prices in gold.
“We have taken measures to help decrease the extent of losses we would suffer but we can’t do too much changing to our system because customers are accustomed to a certain system and we don’t want them to leave either.
“It’s a ticklish situation; having to manage the way you run the business whilst ensuring that the changes don’t scare away customers.”
Another representative said, “Listen, this is not something we are experiencing now; falling gold prices is something that has been around and some of us should have understood how to operate with this market.
“The high price whenever we get it is not a guarantee that will be permanent and people who are in the business should have known by now to get into another avenue just for safety. When the prices fall pawnshops are not able to give the same price for a pawned item and then when that happens the customers that come also slow down because they realize they won’t get the price they are looking for.
“I would say have a safety net because no one knows when things are going to get better.”
Another manager of a pawnshop said that the falling prices in gold have caused his owner to consider closing his business and investing in another avenue. “We have been severely affected by it. We even had to lay off some people because we are a small business and can’t keep up with some of the other bigger outlets.
“We have lost a lot of money from last year to now. We are now looking for other avenues to invest.”
With the aforementioned in mind, many of the representatives of the pawn shops have now asked a critical question, “Can any of the financial experts say when the prices are likely to improve?”
The question comes in light of the fact that these businesses are looking to ascertain as quickly as possible when they would be poised to return to booming profits or if drastic changes would need to be made.
However, according to online reports, last year was deemed one of the most terrible years for the gold industry. Economists have also predicted that this year may also be a rough one. A more detailed review of what some economists have to say about the falling prices of gold and their predictions for the rest of the year can be had at http://libertarianmoney.wordpress.com. and http://investorplace.com.
Additionally, one online article written in 2013, http://www.rferl.org, also shed some light as to why gold prices may be dropping.
According to the article, Julian Jessup, head of commodities research at Capital Economics in London, England said that he expects that the gold prices would stabilize soon.
Jessup said, “Our gut feeling is that gold probably will find a floor fairly soon. A lot of the factors that have undermined it recently are probably a bit overdone.
“But, equally, we don’t expect it to return to anywhere near the highs where it has been over the past few years because that was very much pricing in the prospect of a worst case with a global hyperinflation or the possibility of a complete breakdown of the financial system and I think those fears have passed, too.”

---

---