Gold, as commonly known, is one of the primary collateral used to secure a loan from pawnshops. With rising gold prices, customers can obtain a larger loan amount as the gold jewellery they have pledged is deemed more valuable. This also resulted in higher interest income for these pawnbrokers, driven by the larger quantum, which contributed positively to their overall financials.
With ongoing geopolitical conflicts and expectations of a lower interest rate environment, investors have opted for gold as a safe-haven alternative. This has led to a rally in gold prices since the start of the year, from around US$2,800 ($3,652) per ounce to more than US$4,000 in recent times.
Apart from gold producers that are benefitting directly from this phenomenon, three of the Singapore-listed pawnbrokers are also thriving from this trend and are enjoying strong tailwinds.
