Posts Tagged ‘Gold Prices’

A Real Economic Meltdown

Monday, June 6th, 2011

From NY Times Dot Com

A Real Economic Meltdown
By ROBIN ROMM
Portland, Ore.

JOSH OLLER sits me down in the conference room of Silver Lining, a pawn shop in northeastern Portland. It’s a Monday and only 10 a.m., but already three lines are forming at the loan windows. At the front, a woman in a colorful windbreaker and hot pink pants leans on her elbows on the counter. A man in a long black trench coat waits patiently behind her with a guitar.

Mr. Oller runs Silver Lining with his father, Earl. While we talk, a painting of Earl, made to look like Elvis, watches us from its black velvet canvas. The son has a sedate manner, his calm blue eyes set off by a faded navy polo shirt.

He didn’t think he’d go into pawning. He aspired to a career in federal law enforcement. But after he graduated from college, a longing to remain in Oregon, near family and forests, made him reconsider. “It’s a good business,” he says. “Every day is different. You never know what’s going to come through the door.”

The economic downturn has, according to Mr. Oller, brought more middle-class customers to the loan windows. But the real change in pawning has to do with the skyrocketing price of gold. With gold at $1,500 an ounce, pawnshops are making easy profits by buying gold jewelry and selling it to refineries. For sellers, those gold cufflinks languishing in a jewelry box might now cover several weeks’ worth of groceries.

Even gold dust has become worth pursuing. Inspired by stories he’d heard of people boiling the carpets in old jewelry manufacturing buildings to recover remnants of precious metals, Mr. Oller installed a special sewage filtration system in his shop. Now, after employees work with jewelry, they can wash their hands — those tricky crevasses in the knuckles and under their nails — without throwing money, literally, down the drain. Silver Lining’s sewage sludge is collected, dried, baked and burned. “It’s gross,” he admits. But from hand-washing water, he said, the shop collected about $1,000 last year.

Mr. Oller takes me on a tour of the store, including its maze of storage rooms filled with the traditional pawn loot: electronics and guns. But I have a passion for old junk and we both perk up in a low-ceilinged room holding objects that defy categorization.

“What’s that?” I ask, pointing to a small turquoise trunk. It holds a ventriloquist’s dummy. I desperately want to look at it, but Mr. Oller has moved on to a 100-year-old bottle of Kentucky whiskey. “How much did you loan for that?” I ask.

“Probably 50 bucks,” he says. And then there are the items for which it’s nearly impossible to name a price, like the miniature but functional cannon made out of brass.

When we finish the tour, I find myself drawn to the jewelry cases. It’s hard not to imagine the sad stories behind the diamond rings sitting there — love soured, jobs lost. But I steel myself to see if there’s any gold vintage jewelry, the kind I wear and love. The absence of this — of any gold jewelry — is notable.

Most days I wear a gold Victorian lion pendant that my boyfriend got for me when I sold my first book. I’d long admired it in the window of an estate jewelry store in Berkeley, Calif., where I was living at the time. The impeccably made lion holds a little diamond shard in his fierce mouth. His eyes shine with ruby beads. His whiskers grow from tiny specks beneath his perfectly carved nostrils. I love to think about where he came from, and whom he will belong to after I’m gone. I hate to think — in fact, can’t bring myself to think — of his horrible end if I pawned him. Straight to the scrapper, he’d go.

When I say the fate of all the gold jewelry seems sad, Mr. Oller shrugs. “Gold’s just a commodity, like grain,” he says.

From a pawnbroker’s perspective, this outlook makes sense. Regular customers can no longer afford gold jewelry, and so pawnbrokers stand to make more selling it all to refineries. But I think of my grandmother’s filigreed earrings and my lion pendant, both antique pieces made with great care, now part of my own history. I imagine these objects melted into bars and sold on the open market — to China, to Russia. It’s unsettling.

For a while I wonder whether I can set up a little booth in front of the pawnshop and convince people to sell their antique jewelry to me instead, to save it from its fiery end. But this would probably be illegal, financially suspect … maybe even insane. I settle on hoping that some people, despite this extended recession, can afford to keep their heirloom earrings and cufflinks, medallions and lockets — those little pieces of our human history, sentimental and unrefined.

Robin Romm is the author of “The Mercy Papers: A Memoir of Three Weeks.”

Hampton Roads Pawn Shops Busy After bin Laden News

Monday, May 9th, 2011

From Hampton Roads Dot Com

By Joanne Kimberlin
The Virginian-Pilot
© May 8, 2011
When word came last week that Osama bin Laden was dead, a crowd gathered at Lynnhaven Pawn Shop.

Why? Gold prices spiked briefly after the world’s most-wanted terrorist was killed.

Propelled by economic uncertainty, the precious metal shot up $50 an ounce, prompting folks who keep an eye on such things to scour their jewelry and deposit boxes.

“When I saw the news on TV Monday morning, I knew we’d be busy,” said Nathan Segal, who opened Lynnhaven Pawn nearly 30 years ago. “When I got to work, people were lined up outside ready to sell.”

Pawn shops find themselves at the intersection of a surprising range of events. The bin Laden rush, which lasted until gold prices fell that afternoon, had global fuel. Other runs are the product of much more personal concerns.

Consider the calendar. Easter. Thanksgiving. Christmas. Or even today, Mother’s Day. Segal can track them all with a look inside his vaults.

“We’re at our emptiest just before holidays,” he said. “People come in and pay the loan on Grandma’s china because family is coming to dinner and they don’t want to be embarrassed. Then the next week, they bring it all back.”

Fact is, the business isn’t nearly as wild as it looks on TV, where shows like “Pawn Stars” – the History Channel’s hit series – portray a stream of colorful characters and rare finds.

In real life?

Not so much.

The majority of people who walk in Segal’s door just want to borrow a few bucks on collateral that tilts toward the mundane – a necklace, a bag of golf clubs, a set of silver flatware.

“The real business isn’t something you’d want to watch on TV,” he said.

That doesn’t mean there’s nothing of interest. Segal poked through a tray of jewelry, coins and other keepsakes people had recently brought in to sell.

“Everything here has a story,” he said.

Take the solid gold police badge from New York City, engraved “From your friends – 1970.” Or the massive rings that marked an athlete’s glory days – a Tar Heels bowl game, an Admirals’ championship. Or the small gold band inscribed for an even more momentous occasion: “To love, cherish and obey.”

“Apparently, not anymore,” Segal said with a shrug and a grin.

Divorce. Death. Unemployment. Moving on. Pawn shops are a witness to life’s crossroads, and a barometer of the times.

For example, Segal has noticed a boom in customers who can only speak Spanish, evidence of more immigrants in Hampton Roads. He can gauge the job market by the amount of flat screens, power tools, laptops and guitars awaiting redemption in his storage rooms. He can assess the economy by the number of loans he’s floating – currently around 6,000, which is fewer than two years ago when times were really tight.

And, every now and then, someone does show up with a curiosity that could make the cut on “Pawn Stars.”

Segal reached deep into one of his many safes to retrieve a mysterious lump. Fifteen years ago, it served as collateral for $600 borrowed. Segal says 90 percent of his customers repay their loans, but those who don’t – like the lump’s owner – forfeit their merchandise.

Most items are resold in the shop, but not the lump. Segal peeled back its wrappings to expose the grayish ridges of a giant tooth – a fossil from a woolly mammoth that lived tens, perhaps hundreds, of thousands of years ago.

“Things like this,” he said, “I just have to keep for myself.”

Segal comes from a line of pawnbrokers, the family behind Littman’s, operating in downtown Norfolk since 1892. And while it’s not well known, America owes a lot to this ancient profession. Legend says Queen Isabella of Spain hocked her jewels to bankroll the explorations of Christopher Columbus. As late as the 1950s, pawning was America’s most common form of consumer credit.

But what was once a reputable industry slid into seediness over the past few decades, rife with shady players and stolen goods.

Now, better oversight is helping to polish the trade’s image. Shows like Pawn Stars are dispelling its taboo, or at least fading it.

“I discovered this place about a year ago,” said Dawn, a customer in Segal’s shop who didn’t want her last name in this story. “Women used to never go inside a pawn shop.”

Dawn said Segal’s small showroom – clean and well-lit – made her feel more at ease. And besides, her family needs help.

“My husband is in the ministry and I’m in real estate,” she said. “With the economy the way it is, we’re living from bill to bill. We have our college rings here – for the second time.”

State law caps pawn shop interest at 5 percent per month, a rate that can add up, especially when combined with the 5 percent monthly storage fee commonly charged for holding collateral.

“This is intended to be a short-term loan,” Segal said.

It doesn’t always work out that way. Customers can keep a loan alive indefinitely as long as they pay the interest and storage fee. Pieces of jewelry have been left with Segal for 10 years. One loan has been out for 20.

“They’ve paid more than the jewelry is worth,” he said. “But they’re OK with it. They’re using us like a storage place.”

That security appeals to military members, who often pawn personal firearms before deployments. Others pawn because they can’t qualify for bank loans, or they don’t want family or friends to know they’re short on money, or they like the fact that only their collateral is at stake if they can’t pay back what they borrowed.

The average loan at Lynnhaven Pawn is only around $200, but Segal has handed over as much as $50,000. One of his largest loans was on a set of 1933 baseball cards featuring Babe Ruth and Ty Cobb. A leather belt from the Holocaust era rated a similar loan; 40 gold coins from Nazi Germany were sewn inside its secret compartment.

Segal turns to experts – often with the Chrysler Museum – to authenticate items like that.

“Everybody has Adolf Hitler’s dagger, bought off eBay,” he said. “They’re very disappointed to find out it’s not the real thing.”

Stolen goods are always a concern, one reason Virginia Beach, like many cities, restricts the number of pawn shops within its boundaries. Only 15 are allowed – a ceiling that’s always maxed out – and pawnbrokers need a license approved by a circuit court.

Transactions are logged into a computer and emailed daily to police, including a detailed description of the merchandise and the ID and Social Security number of the person who brought it in. Most police departments have a pawn unit that checks the log against a list of items reported missing in the area.

Nowadays, according to the National Pawnbrokers Association, less than 1 percent of pawned goods are identified as stolen.

“Real criminals know better than to come here,” said Segal, who makes it a practice to collect a photo and thumbprint from every seller as well.

When trouble does turn up at his place, it’s usually the domestic kind: Teens who filch from mom’s jewelry box; couples who split and try to sell each other’s stuff; battered spouses – women and men – desperate to raise some cash to get away.

“They come in with black eyes and busted lips,” he said. “We keep a list of shelters we refer them to.”

Unlike on TV, there isn’t much haggling. The final price doesn’t drift far from the initial offer.

“We have to make money, too,” said Willie Showell, Segal’s assistant manager, “and if something winds up sitting in the back for months, it can be worth even less when it comes out.”

Electronics become outdated particularly fast, one reason pawn shops are only interested in the latest gadgets. Solid loans are the ones made on collateral that grows more valuable with age.

Jewelry and firearms are stored inside separate vaults, watched over by an electronic field that triggers an alarm when disturbed. Segal figures he’s invested close to $50,000 in anti-theft systems. Walls are reinforced. Ceilings are wired. He says he’s the only pawn shop in the area outfitted with a system that sprays tear gas when it detects body heat or shifts in air movement or pressure.

A vibration detector guards valuables inside the “fragile vault” – a small storage room crammed with Lladro and Hummel figurines, silverware and candlesticks, autographed baseballs, antique decoys, ship models and swords, expensive artwork and Lionel trains. Someone borrowed against a platinum record awarded to the Molly Hatchet band. Another loan is secured by a law brief written and signed by Abraham Lincoln.

Discretion is part of the profession. Regular customers of Segal’s often look the other way when they see him in public.

“They don’t want to have to explain anything to their spouse,” he said. “I guess it’s sort of like being a priest. Everything is private.”

As for “Pawn Stars,” Segal has seen the show but rarely tunes in. Too much footage is devoted to the deal.

“It’s not really like that,” he said. “One customer just went through five or six tissues just trying to talk to us. You don’t see that on TV.”

Joanne Kimberlin, (757) 446-2338, joanne.kimberlin@pilotonline.com

Soaring Gold Price Fuels Indian Loans

Tuesday, March 22nd, 2011

From Theaustralian Dot Com Dot AU

THE surging price of gold is prompting a stampede by Indians to pawn their jewellery and gold coins as a way of raising cash for cars, televisions and other consumer goods, according to the country’s biggest lender.

Demand for cash loans using gold as collateral – a regular banking service in India offered at thousands of branches – is exploding at 37 per cent per year, according to HDFC Bank.

Indians are expected to take out loans worth nearly $US12 billion this year by pawning their gold, up from $US2.5bn in 2007, Biju Pillai, the executive vice-president at HDFC, said.

“It’s increasingly popular,” he said, adding that Indian banks and specialist lenders were scrambling to cash in on the trend, which is being driven by a decade of rising prices and India’s huge private stockpile of gold.

Worn as rings, bracelets and neck-laces or stashed away in cupboards and safes, Indians are believed to hold about 18,000 tonnes of gold – worth about $US900bn at present prices.

That is more than twice the size of the combined 8100 tonnes held by the US Federal Reserve at Fort Knox, Kentucky, and a vault beneath the Federal Reserve Bank of New York.

“Gold is an asset that is available to virtually all customers in India, rich and poor. People are using it for buying consumer goods, cars or even just to buy more gold,” Mr Pillai said.

Ajay Mitra, managing director of the World Gold Council in India, said: “Gold is in our DNA. We have been using it for 5000 years and Hindu mythology says the world was created from a golden womb which exploded … The word gold is interchangeable with the word auspicious.”

With a growing population of 1.2 billion people, India’s insatiable demand for gold is driven chiefly by wedding gifts – which account for about half of all purchases.

It is the high level of gold ownership, combined with a great awareness and interest in gold prices, that is driving the popularity of gold loans as an easy way to raise cash.

Gold loans are about 5 per cent cheaper than regular bank loans and require less documentation to complete, Mr Pillai said.

Rising world gold prices, which touched a record $US1437 per troy ounce on March 2 as investors sought safe havens after the earthquake and tsunami in Japan, are also pushing up the size of the loans available to Indian gold owners.

Mr Pillai said that traditionally the market was dominated by small-scale pawnbrokers, but as India’s economy expanded at a brisk 8 per cent annual rate, the gold loan market was becoming increasingly sophisticated, with the country’s top banks and a string of specialist chains, such as Mannapuram Gold Loans, entering the market.

Mr Pillai also said that Indians were gradually overcoming a cultural stigma attached to pawning gold, which has been reinforced by countless Bollywood films depicting it as a humiliating last resort.

“There is a change of mindset under way,” he said. “Slowly but surely, people are realising that it is a smart option.”

Gold Dealer Seeks Pawnshop Variance

Saturday, February 26th, 2011

From AZ Central Dot Com

Gold dealer seeks pawnshop variance
By Michael Clancy – Feb. 26, 2011 12:00 AM
The Arizona Republic

Arizona Gold Exchange is among dozens, maybe hundreds of shops, offering to buy gold from consumers.

But Howard Taylor and his partner, Kevin Stevens, say they are trying to do it a little differently, with more professionalism and class.

Arizona Gold Exchange has two Phoenix stores, one at 9017 N. Cave Creek Road, which is at the southern terminus of the road, and 2535 E. Bell Road.

Although both are classified as pawnshops, giving them the ability to make loans, neither would strike even a pawnshop regular as the same kind of business.

The Cave Creek Road store has a locking door that needs to be released for customers to enter, an armed guard on site, and a few unexpected odds and ends. But other than that, it seems more like a jewelry boutique.

The store is an adaptive reuse of a former car dealership, and it retains its garage doors and large windows. Inside, the floor has been polished, and counters and cases erected. It makes liberal use of diamond-tread steel and rusted metal, along with glass and chrome.

One case holds watches. Another has coins and silver and gold bullion. One has gold jewelry, another only watches, and yet another contains unusual items.

One case holds fine Indian jewelry.

It comes in from collectors, estate sales and other means, including walk-ins.

Taylor and Stevens are specialists in certain items.

“Kevin knows precious metals and bullion,” Taylor says. “I know watches.”

Taylor says 90 percent of the store’s transactions, however, are in gold. With gold prices running more than $1,000 an ounce, the market is lucrative.

Taylor says the competition, while obvious to anyone driving around Phoenix, is difficult to keep track of.

Many of the cash-for-gold places, he says, are merely pawnshops that have always taken gold. But he warns of fraudulent dealers.

“When gold is at $1,300 to $1,400 an ounce, it draws bad people out of the woodwork,” he says.

Taylor is trying to move his Bell Road location, which he says is not a good fit with his business.

His goal is to buy a building at 16026 N. Cave Creek Road and convert it for use by his shop and other tenants.

The deal depends on getting the needed variance and use permit. The variance would allow a pawnshop within the 500-foot limit from residences, and the use permit would allow a pawnshop in a C-2 district (intermediate commercial).

A hearing officer denied the requests, so Taylor hired an attorney and appealed to the Board of Adjustment, which will hear the case next week.

Taylor said board approval would result in an upgrade at the site at Greenway Parkway and Cave Creek Road, the site of the new building. He argues that Arizona Gold Exchange is far removed from the average pawnshop.

Taylor says it is not stuffed with unwanted junk and provides a safer environment.

“There are no degrees of pawnbroker license unfortunately,” he says.

If there were, he said, he could legally classify his stores as something different.

Boom Times For Diamond District

Saturday, July 17th, 2010

From The Wall Street Journal Blog

By Michael Casey

July 16, 2010, 3:41 PM ET. Boom Times for Diamond District.

The world’s financial markets are living through a unique historical moment, one in which a deflationary present competes fiercely with fears of an inflationary future.

A weak economy and high gold prices create a perfect storm for pawn brokers. For proof, look no further than New York’s Diamond District on West 47th Street between Fifth and Sixth avenues. Here, deflation and inflation do battle on a daily basis, creating a new business opportunity for the jewelers who have plied their trade on that strip for the past 60 years.

Deflationary forces lie in the push factors that send a steady flow of people there to convert their gold-based valuables into cash, either through collateralized loans or outright sales. They are the victims of a moribund economy whose modest recovery from last year’s recession is failing to produce jobs or small business revenue growth.

Yet there’s also inflation at work. It’s there in the pull factors driving this business. Both the buyers and sellers on the street know that gold prices are near record highs around $1,200 a troy ounce and are seeking to exploit that. Gold’s gains reflect the broader concern that indebted governments will be forced to devalue their fiat currencies and create monetary inflation.

“It’s usually one or the other that drives this business. Either the economy has come down and people need money, or the gold value has gone up. But in this case it’s both,” said Roni Rubinov, who runs both a pawn broker and jewelry-buying business out of side-by-side offices on W. 47th Street.

He says the flow into his pawn business has, if anything, increased since the 2008 crisis. It’s a trend that reflects the persistence of deflationary pressures in an economy with 9.5% unemployment. Just look at Friday’s data releases: the U.S. consumer price index down 0.1% in June, average weekly earnings down 0.2% in the same month, consumer sentiment down almost 10 points in July.

The flow of pawn customers has increased because the depletion of people’s cash holdings has been “a gradual process” since the crisis, Rubinov said. “It’s not a sudden assault as if someone robbed them…it’s that the well is slowly drying up.”

“The way I’m hearing it, the banks are holding off on personal loans. I guess the public doesn’t have anything else to fall back on,” Rubinov said. He found a moment to talk during a brief break in the stream of clients coming up the stairs, each escorted by a scout from the street carrying flyers that say “We Buy Gold, Diamonds, Watches & Jewelry.”

His analysis of banks is spot on. The Federal Reserve’s latest monthly consumer credit data produced its 18th contraction out of the past 20 months.

Yet, inflation fears are equally powerful.

Yale Zoland, a third-generation jeweler two doors down from Rubinov, did virtually no gold trading until the price started to rise. Now it’s worth up to 15% of his revenue.

It’s a simpler, more commoditized business than the complicated diamond trade his family has traditionally handled. The customers come in and hand over their gold rings and necklaces to Zoland, who weighs them, verifies their carat stamp with acid tests and then offers the sellers a price a few percentage points below that day’s gold fixing. At the end of business, he sells the day’s intake to gold refiners, who melt it.

Given the current public mood, this trade seems unlikely to disappear soon.

It’s about the trust that was destroyed by the crisis, Rubinov said. “People are realizing now they need to have something tangible, not just a piece of paper.”

And yet it is paper — greenbacks, to be precise — that the people coming into his office most want.

Pawnbrokers Continuing to Benefit from High Gold Prices

Thursday, May 27th, 2010

From Market Wire Dot Com

LONDON, UNITED KINGDOM–(Marketwire – May 27, 2010) – The recent surge in the price of gold has seen a huge increase in people choosing to take loans against or sell gold, rather than buy it. More people than ever before are now scrapping their gold items or achieving high loan amounts as gold values have rocketed in these uncertain economic conditions.

This is good news for pawnbrokers up and down the country, who are reaping the rewards of the constant supplies of gold provided to the international market. There has been a huge boom recently in people deciding to pawn gold, with many pawn shops appearing all over the country as a result. These increased prices mean pawnbrokers are able to offer customers much bigger loan values than previously as items are worth more providing greater security against the loans.

A spokesperson for Borro the UK’s first online pawnbroker says: ‘The increase in the price of gold came at a time when people were struggling to get a loan from banks, who were making it even more difficult to obtain finance and redundancies were rife up and down the country.

‘But as well as providing a way of getting from one month to the next, pawnbroking has also made people realise that they can afford luxuries through releasing extra cash from increasingly valuable items.’

Another factor which is likely to be attracting new customers to pawnbrokers, is the fact that credit ratings will not be affected if they cannot pay back a loan, as it would be by high street banks. Pawnbrokers traditionally sell off items if customers can not afford to pay back the capital and the interest, but credit ratings stay unaffected. So in that respect it is a low risk solution for many and with the incredible value of gold right now, this looks set to remain unchanged.

Headquartered in Oxford with offices in London, Borro.com was the UK’s first online pawn shop, changing the face of pawn broking by offering consumers a discreet, safe and hassle-free way to borrow money against their personal valuables.

 

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Pawnonomics by Stephen Krupnik tells the infamous history of the pawn broking industry and shines a bright light into
its darkest corners, while also pointing out some pinnacles along the way.