What a Falling Gold Price Means for Pawn Shops
William Roman wants to borrow money, but his bank won’t lend him any more. So he’s turning to his local pawn shop.
For Roman, a loan from the pawn shop is a lot easier to get. He doesn’t have to fill out an application. The people at the pawn shop don’t check his credit — all they want is something valuable, something they call sell if Roman doesn’t pay them back.
“I’ve pawned laptops, PlayStations,” says Roman. “If I’m not using it, then I’ll just go and pawn it.”
The main thing Roman pawns is his gold. Gold functions in the pawn-shop world much like houses did in the banking world: It’s a valuable asset people can borrow against.
When the price for gold was high, pawn brokers were happy to have it. Their customers took out bigger loans, and they were able to charge more interest. But the price of gold has fallen rapidly this year, and that’s left some pawn brokers in a bind.
“We made loans that we’re holding for people that were made in, let’s say, December, and in December, gold was $1690 [an ounce],” says Emmanual Samuels, a pawn broker in Brooklyn. Today, gold is around $1330.