There are many people who buy gold as an insurance for rainy days as these owners of the precious metal pawn the gold jewellery at pawn shops and if need be they sell them at twenty percent lesser than the market value. This habit of pawning jewellery during ‘hard times’ is not a new phenomenon, it has been in practice since the advent of usury. The gold normally taken as collateral in exchange for cash and as soon as the cash is returned with the pre agreed specific interest, the gold which is normally higher in value is returned to the rightful owner. However selling gold in Asia and selling gold to gold buyers in Brisbane is an entirely different experience. It is the mechanics behind the many trade factions that are based on a commerce system that is thousands of years. Selling golden jewellery is the most basic form trade of gold that relates to the gold buyers in Brisbane. However, look at from a bigger perspective of why people buy gold. In Asia especially; buying gold jewellery is almost customary.
In most scenarios there are three reasons behind the buyer’s intentions towards buying gold. The first and most natural reason off course is to adorn their loved ones in gold so to speak and this is followed closely by the reason which is to ‘show off’ wealth and status. The other objective however behind the buying gold factor is and always has been to have liquid assets that can be converted to cash as quickly as possible. However it is important to know that the pawn brokers in the southern Asian regions operate differently when it comes to pawning jewellery as collateral for loans. Loans are given out to borrowers based on 60 % of the value of the gold jewellery and they normally charge a minimal interest of 2% per month of the amount borrowed and the contracts are short term contracts of 6 months, by which time if the borrower is unable to pay the principal borrowed sum, plus interest, the gold will be forfeited.
In simple terms the gold which is held as collateral is never worth less than the amount borrowed. When the due date for the interest payment arrives, and the failure of the owner of the gold being able to make the 2 percent payment will result in the gold being absorbed by the pawn brokers, as the contract will be deemed null and void. This practice is not only unfair, but it also makes these pawn brokers richer as the person who pawns the gold becomes poorer. These pawn brokers albeit are regulated by the government make enormous profits from unpaid interest and as well as those who actually pay the interest. Although it seems a very low rate at two percent a month, it is common for those who are strapped by ‘bad times’ to extend these interest payments for long periods. In the end, if they fail to make payments on the interest, they not only lose the interest money they have paid over time on their gold jewellery, but end up losing the gold as well. This may seem unfair to most of those reading this, but let us not forget that sometimes, when gold prices fluctuate and minus the cost of the workmanship, the actual worth of the gold is only about 70 % of what was paid for it and at times pawn brokers can suffer huge losses that could wipe out profits of an entire year.